Skip to main content

Full text of "Foreign trade and shipping"

See other formats








Modern Business 







Modern Business 



Dean, New York University School of Commerce, Accounts and Finance 

Associate Editors: 


Titles Authors 

Business and the Man Joseph French Johnson 

Eco«OM,cs OK B„s,«.:ss iFSYXvey""""" 

Organization and Control Charles W.Gerstenberg 

Factory and Office Administration . . Lee Galloway 

Marketing Methods • Ralph Starr Butler 

Advertising Principles Herbert F. De Bower 

Salesmanship and Sales Management . . John G. Jones 

Credit and the Credit Man Peter P. Wahlstad 

Accounting Principles Thomas W. Mitchell 

Cost Finding Dexter S. Kimball 

Corporation Finance ....... William H. Walker 

Business Correspondence Harrison McJohnston 

Advertising Campaigns Mac Martin 

Inland Traffic Simon J. McLean 

Foreign Trade and Shipping Erich W. Zimmermann 

Banking Principles and Practice . . . E.L. Stewart Patterson 

Domestic AND Foreign Exchange . . . E.L. Stewart Patterson 

Insurance AND Real Estate ] wXr^LLn:;'" 

Merchandising John B. Swinney 

The Exchanges and Speculation .... Albert W. Atwood 

Accounting Practice and Auditing . . . John T. Madden 

Financial and Business Statements . . . Leo Greendlinger 

Investment Edward D. Jones 

Commercial Law Walter S. Johnson 




Instructor in Economics, Neiv York University 


W. C. CLARK, Ph.D. 

Assistant Professor of Political and Economic 
Science, Queens University 








The title and contents of this volume, 
as well as the business growing out of 
it. are further protected by laws re- 
lating to trade marks and unfair trade. 

All rights reserved, including transla- 
tion into Scandinavian. 

Registered trade mark, Reg. U. S. Pat. Off., 
Marca Registrada, M. de F. 

Made in U. S. A. 


This book deals with a subject which, to an excep- 
tional degree, is affected by the European War. It 
discusses questions which, at present, are foremost in 
the minds of our statesmen and lawmakers, and which 
are the center of public discussion. This rendered the 
task unusually interesting, but at the same time deli- 
cate. A text book must contain the latest available 
information and be up-to-date in its interpretation of 
conditions and principles, and yet not be too journal- 
istic. This imposes the duty of sifting the lasting 
good from the chaff of partisan discussion in the mass 
of contemporary writing on this subject. 

The mass of literature is so extensive that I find it 
impracticable to mention specific works which have 
been of assistance in the preparation of this volume 
without unduly lengthening this preface. 

In particular, I wish to express my appreciation 
of the encouragement, advice, and assistance of my 
friend, Professor Edwin J. Clapp, in planning and 
writing this book. 

Erich W. Zimmermann. 
University Heights, 

New York, 





1. New Tendencies in the Foreign Policy of the 

United States 3 

2. Recent Economic Changes 4« 

3. Energetic Pursuit of Foreign Trade an Economic 

Necessity 5 

4. Favorable Trade Balance 7 

5. Influence of the European War upon Our Exports 7 

6. What Exports Should Be Stimulated? . ... 8 

7. Imperative Need for a National Foreign Trade 

Policy 11 

8. Foreign Trade Development Profitable to Our In- 

dustries 12 

9. Foreign Trade Expansion a Road to National 

Power 13 

10. Present Time Affords Ideal Opportunity for the 

Expansion of Trade 14> 

11. Factors That Have Already Aided Foreign Trade 

Expansion 16 

12. What Must Still Be Done 17 


1. Former Isolation 20 

2. Canada's Commercial Policy 21 




3. General Character of Canada's Foreign Trade . 22 

4. Canada Formerly in First Stage 23 

5. A Sudden Reversal in the Trade Balance ... 24 

6. Will the Change Prove Permanent.? .... 25 

7. Necessity for Increased Production .... 26 

8. What Lines of Production Should Be Stimulated? 27 

9. Manufacturing in Canada 30 

10. Her Present Opportunity . . . . . . .31 

11. Efforts That Have Been Made to Promote Trade 32 



1. Nature of World Trade 36 

2. Growth of World Trade 37 

3. Fundamental Causes of International Trade . . 37 
4?. Differences in the Stage of Economic Development 38 

5. Differences in Natural Resources 39 

6. Effect of Natural Resources on the Trend of 

World Trade 40 

7. International Coal Trade 41 

8. Extent and Significance of British Export Coal 

Trade 42 

9. German Foreign Trade in Coal 43 

10. World-Wide Distribution of British Coal ... 43 

11. Future of the Coal Trade 44 

12. Iron Ore 44 

13. International Grain Trade . . . . . . .45 

14. The Wheat Trade 47 

15. Intensive and Extensive Wheat Production . . 49 

16. Seasonal Character of the Wheat Trade ... 50 

17. Corn Crop 51 

18. Other Cereals and Starch Foods 51 

19. Cotton Trade 53 

20. Tobacco Trade 55 



21. International Sugar Trade 56 

22. Brussels Conventions 57 

23. Coffee 58 

24. Rubber 60 


1. Intimate Relation of Government and Foreign 

Trade 62 

2. Revenues 62 

3. Shipping 63 

4. Trade Information 64 

5. Difficulty of Obtaining Americans for Positions 

Abroad 65 

6. Training Needed 66 

7. Training Available . ■ 67 

8. Canada's Efforts 68 

9. General Work of the Philadelphia Commercial Mu- 

seum 69 

10. Private Organs of Information 70 

11. Important Service of Express Companies ... 70 

12. Banks as Sources of Promotion 71 

13. Foreign Trade Department of the Philadelphia 

Commercial Museum 73 

14. The National Foreign Trade Council .... 75 

15. Trade Papers 75 

16. Branch Banks '7Q 

17. Dollar Exchange 78 

18. Foreign Investments "^9 

19. Foreign Branches of Canadian Banks .... 80 

20. Canada's Foreign Investments 81 

21. Railroads and Foreign Trade 82 





1. Variety of Foreign-Trade Methods .... 84 

2. Direct and Indirect Methods 85 

3. Export Department 87 

4. Marketing Policies 87 

5. Branch Houses 88 

6. Salesmen Abroad 88 

7. Local Commission Agents 89 

8. Forwarding Agents 91 

9. Freight Brokers 92 

10. Parcel Post 92 

11. Selling by Mail 94 

12. Indirect Exporting 94 

13. Position of the Middleman 95 

14. Early Merchants Replaced by Agents .... 96 

15. Position of Export Commission House ... 97 

16. Definition of a Commission Plouse 98 

17. Commission House as Merchant 98 

18. Advantages Offered by the Commission House to 

the Foreign Buyer 99 

19. Advantages Offered by the Commission House to 

Exporting Manufacturer 101 

20. Efforts of the Exporter to Support the Commis- 

sion House 102 

21. Relation of the Commission House to the Foreign 

Agents 102 

22. Recent Inroads in the Field of the Commission 

House 103 

23. New Services of the Export Commission House . 104 

24. Limitation of the Commission House Service . . 104 

25. Merchant System ; Loaning Capital to Foreign 

Importers 105 

26. Manufacturer's Agent 107 



27. Canadian Practice 108 

28. Commission Houses in Canadian Trade . . . 109 



1. Need of Cooperation 110 

2. European Methods Ill 

3. Isolation of the American Exporter . . . .113 

4. American Copper Abroad 114 

5. Prussian Government and German Potash . .114 

6. Smaller Manufacturer Handicapped .... 116 

7. Advantages of Cooperation 118 

8. Various Forms of Cooperation 119 

9. German Cartels and Syndicates 119 

10. Strong Export Policies 121 

11. Greater Necessity for Cooperation After the Eu- 

ropean VV^ar 122 

12. Recent Attempts to Bring About Cooperation . 122 

13. International Manufacturers' Sales Company of 

America 123 

14. Plan of Mr. W^. S. Kies 125 

15. Legal Status of Cooperative Organizations . . 127 

16. Permissive Legislation Needed 128 

17. Objection to Foreign Trade Exemption . . .128 

18. Clayton Anti-Trust Law and Foreign Trade . . 129 

19. Federal Trade Commission 130 

20. V\^ebb Bill 131 

21. The Export Association of Canada .... 132 



1. Soliciting Indents 135 

2. Sending Samples 135 



3. Samples Issued Represent Goods . . . . . 136 

4. Price Policy 137 

5. Details of Quotations 138 

6. The Indent 149 

7. Standardizing the Order 150 

8. Packing for Export 152 

9. Weights and Measurements 154 

10. Marking the Goods 154 

11. Invoicing 155 

12. Sundry Documents 157 



1. Inland Transportation 159 

2. ■ "Straight" and "Order" Bills of Lading . . .161 

3. "Thru" Bills of Lading 161 

4. Bills of Lading in Canada 162 

5. The "London Clause" Charge 162 

6. Ocean Rates 163 

7. Routine of Making the Shipment 163 

8. Documents 164 

9. Steamship Bill of Lading 169 

10. "Foul" and "Clean" Bills of Lading . . . .171 

11. Consular Services 172 

12. Certificates of Origin 176 

13. Other Certificates : Special Regulations . . . 176 



1. Two Stages of the War 178 

2. America's Foreign Trade in Recent Years . . 179 

3. Trade with Europe 180 

4. Trade with Other Continents 183 



5. Nature of American Trade 184; 

6. Imports . 186 

7. Quantities and Prices 190 

8. America Enters the War 192 

9. Government Control of Trade 193 

10. How the Exporter is Affected 194 




1. Freedom of the Seas an International Law . . 199 

2. British Statement at the Hague Conference . . 200 
8. Interest of the United States 202 

4. Freedom of the Seas and Economic Law . . . 202 

5. Reasons for Difference Between Land and Water 

Transportation 203 

6. Guarantees of the Freedom of the Sea .... 204 

7. Tonnage Definitions and Tonnage Ratios . . . 205 

8. First Proposals of a Uniform Method of Measur- 

ing Vessels 206 

9. Moorsom System 207 

10. Freight Charges and Kinds of Tons . . . .209 

11. Computing Net Tonnage from Gross Tonnage . 210 

12. Cargo Space and Dead-weight Capacity . . . 211 

13. Ship-Inspection and Registration 212 

1-1. Regulations Governing the Manifest .... 215 



1. Ship Development 217 

2. Causes of Growth 218 

3. Steam and Sail Tonnage 219 

4. Oil Burning Vessels 221 



5. Future of the Sailing Ship 222 

6. Replacement of Wooden by Iron and Steel Vessels 223 

7. Classification of Merchant Fleet in Regard to 

Service 223 

8. Tramp Distinguished from. Liner 224 

9. Construction of Tramp Steamer 226 

10. Economics of the Tramp 227 

11. Occupation of the Tramp 227 

12. Legal Status of the Tramp 228 

13. Operation and Management of Liners .... 229 


1. Epoch of the Merchant Carrier 232 

2. Coming of the Public Carrier 233 

3. Renaissance of the Private Carrier .... 23-4 

4. Examples of Private Carriers 235 

5. United Fruit Company and the Banana Trade . 236 

6. Coal and Petroleum Carried by Private Lines . . 237 

7. Merchants* Private Lines 238 

8. Pacific Ocean and the Railroad-Steamship Line . 239 

9. Foreign Railroad-Steamship Lines .... 240 



1. Growth of Sea-borne Trade 242 

2. Evolution of the Freight Sei'vice 244 

3. Berth Traffic 245 

4. Line Traffic 246 

5. Modern Charter Market 246 

6. Operation of Charter Business 247 

7. Port of Destination 249 

8. Ship Brokers 251 



9. Charter Parties 251 

10. Operation of Line Traffic 252 

11. Seaboard Brokers 253 

12. Cost of Employing Forwarding Houses . . . 253 

13. Steamship Agents 254* 

14. Transshipment 254 


1. Charter and Liner Rates 257 

2. Causes of Low, Charges of Water Transportation 258 

3. Rate Fluctuation 260 

4. Conditions Affecting Rates 262 

5. Rate Basis not Cost of Operation 264 

6. Knot Time 265 

7. Competition 266 

8. Load Factors 267 

9. British Coal Exports and World Charter Rate . 268 

10. United States Coal Exports 269 

11. Triangular Voyages 270 

12. Mixed Cargo as a Rate-Making Factor . . . 271 

13. Rate Quotations 272 

14. Effect of Tramps on Line Rates 273 

15. Rates and the European War 274 



1. Regulated Versus Wild Competition .... 277 

2. Government Livestigation . 277 

3. Tramp Vessel Combinations 278 

4. Examples of Charter Vessel Combinations . . 279 

5. Liner Cooperation 280 

6. Agreements in L^nited States Trade .... 281 

7. Important Ship Combinations in United States . 283 



8. South American Trade 283 

9. Conferences and Pools 284* 

10. Administration of Pools 285 

11. Immigrant Traffic Pools 286 

12. Conference Advantages to Shippers .... 286 

13. Rate Charges and Rate Wars 287 

14. General Advantages 288 

15. Shippers' Objections to Combinations .... 290 

16. New Lines 291 

17. Combinations Among Steamship Lines in the Ca- 

nadian Trade 292 

18. Evidence Before Commission of Investigation , . 293 



1. Nature and Function of a Port 294* 

2. Value of Seaport to Community and "Hinterland" 295 

3. Four Classes of Ports 295 

4. New York's Predominance 297 

5. New York's "Hinterland" 299 

6. Railroad-Steamship Lines 300 

7. Charter Traffic in Atlantic Seaports .... 300 

8. "Entrepot" or Transshipment Trade .... 302 

9. Lack of Transshipment Trade at New York . . 303 

10. British Raw Materials 304 

11. Free Ports 307 

12. Rail and Water Coordination of Carriers . . . 309 

13. American International Terminal Corporation . 309 

14. Canada's Leading Summer Port: Montreal . . 310 

15. Montreal's Hinterland 311 

16. Canadian Pacific and Grand Trunk Railways . . 312 

17. Coordination of Rail and Water Services at Mon- 

treal 312 

18. Traffic to and from Montreal 313 



19. Canadian Pacific Ports 31 '3 

20. St. John and Halifax 313 



1. Present Role of American Shipping .... 316 

2. Coastwise Tonnage 316 

3. Merchant INIarine a National Question . . .317 
■i. Beginnings of Our Merchant Marine . . . .317 

5. Development of Shipping Checked .... 318 

6. • Shipping Begins to Decline 319 

7. Recent Tendencies 319 

8. American Merchant Marine Compared to Others 320 

9. United States' Steam Foreign Trade .... 321 

10. Awakening Interest 322 

11. Adverse Economic Conditions 323 

12. Congressional Attempts to Aid 323 

13. New Conditions Caused by the European War . 324 

14. Ship Purchase Bill 326 

15. Seamen's Law 327 

16. Loss of Pacific Trade 328 

17. Purchase of the Pacific Mail 329 

18. Status on the Atlantic 329 

19. British Restrictions 330 

20. Present Role of Canadian Shipping .... 331 

21. The Lake Fleet 331 

22. Seagoing Coasting Trade 333 

23. Dry Dock and Dry Dock Subsidy Policy . . . 334 

24. Another Form of Government Aid 335 

25. Discrimination Against a Canadian Marine . . 336 

26. Proposals of the Dominion Government . . . 337 

27. Suggested Form of Government Aid .... 338 

28. Other Proposals 338 

XV— 2 




SECTION p^^jj 

1. War Problems Displace Peace Conditions . . . 340 

2. Demand for Ships 34,1 

3. Operations of the Shipping Board ..... 342 

4. New Shipyards Necessary 344 

5. Materials Needed 345 

6. Labor Available not Adequate 346 

7. Operating the Ships 347 

8. Government or Private Operation 348 

9. American Shipping as Part of World's Shipping . 349 

10. World's Tonnage in 1914 -351 

11. Changes Wrought by War 352 

12. Shipping Losses 354 

13. Meeting the Losses 354 





1. New tendencies in the foreign policy of the 
United States. — Washington, in delivering his fare- 
well address, laid down the basis of the foreign policy 
that this nation was to follow for almost a century, 
when he uttered the following words : 

The great rule of conduct for us in regard to foreign na- 
tions is, in extending our commercial relations, to have witli 
them as little political connection as possible. So far as we 
have already formed engagements, let them be fulfilled with 
perfect good faith. Here let us stop. 

This sentiment was the keynote of all the foreign 
relations of the United States until the time when the 
fortunes of war transferred to us the Spanish colonies. 
The Monroe Doctrine was largely an expression of our 
desire not to become entangled in foreign affairs. The 
thought that international matters concerned Europe 
only, and not ourselves, has long lingered in the public 
mind, and probably is largely responsible, even today, 
for the attitude of the average American toward for- 
eign commerce. To him, foreign trade is somewhat in 


the nature of a venture, individual in character, and 
the idea of an organized national policy in foreign 
coroinerce is new to him. It is important to remem- 
ber that there was a strong economic basis for this 
provincial attitude of mind. Vast unexploited re- 
sources in the United States that promised the yield 
of large profits caused the American to concentrate 
on a domestic policy. 

2. Recent economic changes. — ^While this mental 
attitude of the people has undergone little change, a 
new order of things has been brought about by the 
growth of knowledge and skill and by the progress of 
invention. Hardly a century ago foreign commerce 
was confined to dealings in a small range of articles. 
Today it has burst these bounds. The multiplica- 
tion and modernization of the means of transpor- 
tation have enormously reduced the cost of carriage. 
Modern transportation supplied the means, just as the 
enormous output of machine production supplied the 
incentive, for distributing over the world the products 
of the wealth and labor of every country. 

The great European war has taught us how the 
commercial interdependence of nations reacts upon 
their political relationships. The time of Washing- 
ton is not our time, the domestic past must give way 
to an international future. The world is no longer 
patient with passive onlookers. It recognizes only 
active workers. Just as England had to give up her 
long-cherished policy of "splendid isolation," just as 
Bismarck's conception that Germany's interests were 


bound by the borders of Europe, was superseded by 
the slogan "Germany's future lies upon the water," 
just so this country has been drawn into the whirl- 
pool of world politics, because it has been drawn into 
the circle of world trade. 

3. Energetic pursuit of foreign trade an economic 
necessity. — To be sure, this country for many decades 
past, has been engaged in foreign trade. Even before 
the European war, the volume of our exports and 
imports had reached astounding figures, altho our for- 
eign trade was small in proportion to our domestic 
commerce. Our exports consisted largely of food- 
stuffs and raw materials — commodities which practi- 
cally market themselves. The considerable increase 
during recent years in the export of manufactured 
goods has been largely the result of the splendid pio- 
neer work of a few large corporations that have been 
for many years building up their trade in foreign mar- 
kets with energy and intelligence. Xot until recently, 
however, has it been recognized that it is necessary for 
the nation to enter into competition on a large scale for 
the markets of the world, and to sell in those markets, 
not the wealth of our soil before American labor has 
been added to it in any form whatever, but the 
products of American industries. The time has come 
when we must realize that it is wiser, from a national 
standpoint, to export flour rather than wheat, cot- 
ton goods rather than raw cotton, electrical appli- 
ances rather than copper in its crude state. We sell 
at 12 cents a pound cotton that represents hardly any 


labor, and buy it back from the thrifty Swiss at $40 
a pound in the form of fine handkerchiefs — which rep- 
resent little except labor. This country has today 
reached a point in its economic development where the 
systematic and energetic promotion of the export of 
manufactured products is an absolute necessity, a 
prerequisite of further growth along right lines. 

It is only right to give reasons for such a statement. 
History furnishes the first reason. Every young and 
developing nation passes thru four stages of evolution. 
At first it has to rely upon the import of machinery 
and other manufactured goods for the development of 
its natural resources. Since it is unable to pay for 
this foreign capital brought in on credit for the pur- 
pose of exploiting its resources, it becomes indebted 
to other countries for the amount by which the value 
of its imports exceeds the value of its exports. As 
the development of the land proceeds, and increasing 
quantities of raw materials, grains, meats and the 
more valuable minerals are exported, the country 
gradually gains a position where it is able to pay in 
the form of commodities, not only for its imported 
goods but also for interest on foreign obligations 
and for services rendered by foreign shipping com- 
panies, bankers and insurance companies. The tran- 
sition from this second phase to the third is almost 
imperceptible. It consists in a further increase of the 
export surplus to a point where not only all obli- 
gations to foreign nations are met, but the indebted- 
ness to foreign capital is reduced. The fourth stage 


is that already reached by the great manufacturing 
nations of Europe, which have passed the debtor stage 
and have succeeded in reversing their positions and 
becoming creditors. Again, just as in the first phase 
of evohition, the imports exceed exports, now — not as 
a result of borrowings but of lendings — the excess of 
imports over exports represents largely the payment 
of interest on capital invested in foreign countries. 
In economic terms, the typical historical development 
is this: the unfavorable trade balance of the first 
j)eriod is reversed in the second to a favorable one. 
The third stage represents merely an intensification 
of the conditions of the second, while during the 
fourth a return to the unfavorable trade balance takes 

4. Favorable trade balance. — When we speak of 
favorable trade balance, we refer to that state of a 
country's foreign trade in which the value of its ex- 
ports exceeds that of its imports. Such a trade 
balance, if confined to the visible trade, is really 
fictitious. The exchange of commodities forms only 
a part of the commercial relationship of one nation 
with another. The services of bankers, carriers, 
insurers and investors are the invisible exports that 
largelj'' pay for the imports of commodities. The in- 
debtedness incurred by tourists abroad, and the remit- 
tance of money to relatives and friends in other 
countries, are other factors which have a strong bear- 
ing upon the true balance of international obligations. 

5. Influence of the European war upon our exports. 


— The existence of a "favorable trade balance" for any 
length of time, is a myth. Foreign trade is really 
barter, and if we do not receive commodities in pay- 
ment for om' exports, we are sure to receive other 
forms of value. It has been stated that the "favorable 
trade balance" of this country, amounting in normal 
times to a half billion dollars, does not suffice as a 
means by which to meet our annuallj'^ recurring pay- 
ments abroad, of which the chief are caused by tourists' 
expenditures, remittances to friends, freight payments 
for ocean transportation, and interest on American 
securities held abroad. Accordingly, the actual 
balance of our international payments in normal times 
is said to be really unfavorable to us. Thus, before 
the European war, we were still in the second stage 
of economic development. The extraordinary con- 
ditions caused by the war have increased to more than 
three billion dollars per year, the excess value of our 
exports over our imports. This condition has ad- 
vanced us into the third stage ; that is, it has placed us 
in a position where we have begun to reduce our 
foreign indebtedness. And indications point to the 
probability that we are rapidly approaching the 
fourth stage, that of a creditor nation. 

6. What carports should be stimulated? — If we wish 
to derive lasting benefit from these conditions — to 
shake off once for all our dependence upon European 
capital, and to become permanently a creditor nation, 
we must continue to increase our export not only 
of commodities but also of services and of capital. 


We must, therefore, enlarge the services of our bank- 
ers, build up a great merchant marine and develop our 
insurance business. Before we can export capital on a 
large scale, we must first accvmiulate so much capital 
that we can spare some of it for exportation to foreign 
countries without depriving our domestic business of 
the means necessary for its development. 

What shall be the commodities the export of which 
we must stimulate systematically and energetically? 
In the past, foodstuffs and raw materials formed the 
bulk of our exports. It is true that manufactured 
products now play a more important part in our ex- 
port trade than formerly; thirty-five years ago manu- 
factures constituted only 15 per cent of our total ex- 
ports, whereas they now amount to almost one-half. 
But even today the export of manufactures embody- 
ing a large percentage of high-class labor is relatively 
small, by no means as great as it should be consider- 
ing the large supply of skilled labor from which the 
industries of this country can draw. The proportion 
of manufactures to exports is very much less in this 
country than it is in Great Britain and Germany. 

In the past, we were justified in exporting mainly 
foodstuffs and crude, or semi-crude, materials. A 
country naturally exports those commodities in the 
production of which it enjoys a relative advantage 
over other countries. It exports those things which 
are low in price within its borders, because in produc- 
ing them it has an advantage over other countries in 


regard to some of the prime factors of production: 
land, labor, capital, transportation facilities, and a 
fifth factor, which is a composite of business acumen, 
spirit of enterprise, organizing ability and the in- 
ventive power. In the early stages of the economic 
development of a country the land factor is of primary 
importance ; capital, at that stage, is insignificant ; and 
only in the later periods, when there is intensive in- 
dustrialization, does labor (i.e., highly skilled labor) 
enter into the productive process. The rapid growth 
of our wheat exports during the past century was due 
to the advantage which we enjoyed over the European 
farmer in our vast tracts of new and fertile land. 
Later on, the extensive application of agricultural 
machinery and cheap transportation became decisive 
aids in our quest for the world's markets. 

It is economically sound for us to export raw cotton, 
in exchange for German chemicals, so long as the cost 
of producing a bale of cotton in the United States is 
less than would be the cost of producing in the United 
States the chemical which Germany is willing to send 
in exchange for that bale of cotton. But the increas- 
ing industrialization of this country tends to eliminate 
more and more the basic differences between the 
economic structure of this country and that of the 
countries of Europe. The rapid growth of the city 
population, with which our agricultural development 
has not kept pace, has reduced the surplus of food 
stuffs available for export, and brought us near the 
point where the importation of food stuffs will be a 


necessity, and where our food supply, instead of being 
a resource, will constitute a serious problem. The 
industrialization of vast sections of the United States 
increases both the possibility and the necessity of pro- 
tecting our national resources, and of exporting them 
only after a considerable amount of labor has been 
added. Finally, the industrial development of this 
country resulting from the European war, has given 
us a productive capacity that cannot possibly be util- 
ized unless we extend our exports of manufactures. 

7. Imperative need for a national foreign trade 
policy. — These considerations serve to show that the 
advantages of our great natural resources cannot take 
the place of those to be derived from increasing our 
exports. The systematic development of the exporta- 
tion of manufactured products becomes imperative as 
a national policy. 

Up to this time, a definite national foreign-trade 
policy has not been necessary. We may say that our 
foreign trade of the past sprang up spontaneously 
because of the variety, richness and abundance of our 
natural resources. It was largely a non-competitive 
trade. The market was there. The goods sold them- 
selves. Our trade was mainly with Europe, and it 
flourished simply because we produced things that 
were different from those produced over there. But 
now that manufactured products are to move into the 
foreground, our production will cease merely to sup- 
plement that of Europe. The trade relations that 
now exist between the two continents will be largely 


superseded by an intense rivalry in competitive mar- 
kets in foreign lands, such as South America and the 
Far East. 

All this does not mean, however, that we must 
plunge into unprofitable ventures, individually, mere- 
ly because our doing so might be advantageous for the 
country as a whole. It would be senseless to advocate 
a foreign trade policy whose realization would be a 
burden on those who would have to carry it out. 

8. Foreign trade development profitable to our 
industries. — The systematic development of the ex- 
portation of our industrial products would prove 
profitable to our manufacturers. It would bring a 
more steady and continuous prosperity to our indus- 
tries. In the words of Secretary William C. Redfield, 
of the Department of Commerce : 

We have learned the lesson that our factories are so large 
that their output at full time is greater than America's mar- 
kets can continuously and regularly absorb; we know now 
that if we will run full time all the time, we must do it by 
reason of the orders we take from lands beyond the sea. To 
do less than that means homes in America in which the hus- 
bands are without work; it means factories that are shut 
down part of the time. And because the markets of the 
world are greater and steadier than the markets of any one 
country can be, and because we are strong, we are going to 
go out into the markets of the world and get our share. 

Additional orders from any source tend to reduce 
the overhead expenses of production, and tend also 
to reduce the cost of raw materials by increasing the 
quantity bought. All the advantages of large-scale 


production come into play when these extra orders are 
received. In normal times the production of the 
factories of the country could be increased 25 per 
cent if those factories were run to full capacity. 
Moreover, this last 25 per cent that would bring full 
capacity, could be gained at a much lower proportion- 
ate unit cost than the first 75 per cent. 

Increased orders from foreign countries tend to 
change the seasonal demands to year-round demands. 
Few people realize the great advantage that the manu- 
facturer derives when he possesses a market for his 
products in the southern hemisphere, where the seasons 
are exactly the reverse of our own. 

The business man who recalls the panics of 1893 and 
1907 knows the effect that a domestic business crisis 
produces upon his organization, A well-balanced 
export trade of 25 per cent of his domestic business 
would have carried almost any manufacturer of 
branded products thru these periods of domestic panic 
without serious loss. 

Mr. James A. Farrell, President of the United 
States Steel Corporation, has thus expressed his view 
on this situation: 

No issue is of more vital importance to the welfare of 
American industrial enterprises and labor than the stimula- 
tion of our commerce abroad. It is a recognized fact that 
extensive trade over the seas tends to stabilize industry by 
insuring to manufacturers and producers a larger sphere of 

9. Foreign trade expansion a road to national 


power. — Great results may follow an expansion of 
our foreign trade. In this connection Senator Oscar 
W. Underwood has said : 

The benefits which may flow from foreign trade are not 
confined to those of pecuniary appeal to private capital and 
individual initiative. In a nation, commercial and industrial 
relations may often be justified in terms of national power 
and security. An aggressive foreign policy is an essential 
of defensive nationalism for the United States. 

The nations of the world are no longer concerned 
with military aggrandizement so much as they are 
with commercial prestige. The contest today is for 
supremacy of trade in the world's markets, because 
that country which is a power in the field of commerce 
is a power in other fields also. Sir Walter Raleigh 
once said: "the nation which controls the sea controls 
trade, and the nation which controls trade controls 
the world." 

It follows that in carrjang on foreign trade, men 
must think in terms of national competition. In 
China and South America the contest is not so much 
between individual corporations as it is between 
national industries. Hence the merchant or manu- 
facturer who exerts his energy and wit to promote 
foreign trade serves his own interests, and at the same 
time contributes his share toward enlarging the 
political influence and prestige of his country abroad. 
He should go into foreign markets not merely as one 
who expects to reap a harvest, but also as one who is 
sowing the seed of good-will from which his country 


will benefit. In short, the business man who goes 
into foreign markets should feel that he is a repre- 
sentative of the highest ideals of his nation. 

10. Present time affords ideal opportunity for the 
expansion of foreign trade. — Thus, from both within 
and without there comes to America the call to ex- 
pand its sphere of activity in foreign lands. Not 
only has the time come when it seems both expedient 
and necessary to stimulate this development, but 
Providence has seemed to favor this step by removing 
impediments and aiding our efforts. 

Several great events have recently occurred in this 
country which, altho they are not all primarilj^ related 
to the development of foreign trade, have a most bene- 
ficial influence upon it. These are: the completion 
of the Panama Canal; the recent development of the 
American shipbuilding industry and of the American 
merchant marine ; the passing of the Federal Reserve 
Law ; and, in a more indirect way, the establishing of 
the Federal Trade Commission. The opening of the 
Panama Canal has brought large markets nearer to 
the producing centers of this country, thus placing 
the American manufacturer on a more favorable basis 
in relation to his foreign competitors. The develop- 
ment of the shipbuilding industry and of our merchant 
marine promises to increase the number of ocean car- 
riers available to us. The Federal Reserve Law ex- 
tends the activities of national banks to other lands, 
and grants to the American exporter the support of his 
own banks, placing him on a par with his foreign 

XV— 3 


competitors. Finally, the establishment of the 
Federal Trade Commission bids fair to remove from 
our foreign trade the fetters that restrictive legislation 
has imposed upon it. The Federal Trade Commis- 
sion has fathered the Webb Exporting Bill, which 
seeks to allow our merchants to combine in the pro- 
motion of export trade. 

Then came the great European war. A prominent 
banker has thus described the influence it has had upon 
the United States : 

It opened to this country the great opportunity — not to 
dispossess and occupy the places left temporarily vacant by 
our warring brethren across the sea, but the opportunity 
to complete and establish permanently the institutions and 
principles requisite for foreign commerce. Half the trade 
of the world has, temporarily at least, been cut loose from 
its moorings. The amazing circumstance of much of South 
America with no buyer for its products, or no facilities for 
their financing and shipment, and the enormous German 
trade of Russia suddenly offered to the new world, has awak- 
ened the imagination of this country. The half-time laborer 
in the idle mill, noting the feverish activity in a neighboring 
plant working on an export contract, begins to see the sig- 
nificance of foreign commerce to domestic affairs. No sit- 
uation could be more favorable for bringing about a full 
recognition and understanding of not only the necessity for 
foreign trade, but the opportunity in foreign trade; for 
breaking down the distinctions between foreign trade and 
domestic trade existing in the public mind ; for the establish- 
ment of a strong constructive national policy which shall 
require that no product be sold abroad which has not first 
been brought to the highest state of manufacture, a policy 
which shall solidly support merchants, manufacturers and 
government policies to that end. 


11. Factors that have already aided foreign-trade 
expansion. — The American Government is keenly 
eager to further this pohcy. The Shipping Bill, the 
Webb Export Bill, the Pan-American Financial Con- 
ference, and the work of the International High Com- 
mission, simply serve to illustrate the manifold ways 
in which Washington is trying to aid the new move- 
ment. Business also is beginning to realize the value 
of the opportunity. Merchants' and manufacturers' 
associations, boards of trade, and chambers of com- 
merce are giving their fullest attention to the problem 
of the expansion of our foreign trade. The creation 
of the National Foreign Trade Council, and the 
organization of the American International Corpora- 
tion, the Latin-American Development Company, 
and others, as well as the establisliment of foreign 
branches of national banks, are unmistakable signs 
of a new era in the foreign trade of this country, and of 
a new day in the development of American business. 

12. What must still he done. — And yet, only a 
beginning has been made. Before the potential trade 
possibilities have been turned into actual achievement, 
much prejudice must be overcome, many a lesson must 
be learned, much information of a reliable and useful 
character must be disseminated. Modern business 
is a science. This is true in general, but it is especially 
true as regards foreign trade. Careful calculation, 
scientific methods of accounting, a more thoro study 
of all conditions — geographic, economic, social, legal 
— bearing upon the business possibilities in foreign 


markets ; all these are prerequisites of success. But if 
this country wishes to avail itself fully of its oppor- 
tunity, it must realize that the task ahead is difficult — 
difficult because of the strength of our competitors, 
temporarily absent, who were long ago intrenched in 
these markets ; difficult also, because of the complexity 
of the problems of foreign trade. 

It is true that the United States enjoys valuable 
advantages that none of its competitors possess, be- 
cause of its unequalled supplies of cheap food and of 
raw materials, and because of the vast protected home 
market, which furnishes a basis for manufacturing on 
a large scale. This last factor has reduced overhead 
expense to such an extent that the handicap of high 
labor cost is largely offset. 

But our merchants are still in a large degree un- 
trained and inexperienced in the customs and methods 
of foreign trade. The uncertainty of the legal status 
of foreign commercial activities prevents the use of 
the most efficient method of handling of our export 
trade — namely, cooperation. Mr. Frank A. Vanderlip, 
President of the National City Bank of New York, 
says: "We are a nation of amateurs in the drafting 
of commercial treaties." And especially, we lack as 
yet a national commercial policy similar to the policies 
possessed by our most formidable competitors. 

Success in foreign trade depends upon the serious- 
ness with which a nation is willing to enter mi- 
accustomed fields, and to take risks with which it is 
not familiar. Success depends upon the nation's 


readiness to adapt itself to the requirements of various 
markets; upon the wiUingness of its investors to pre- 
pare the path of its trade; upon its enthusiasm, its 
sense of fair play and its vision. In the last analysis, 
a nation's success in this field depends upon the 
economic power that it can exert in the world markets, 
and upon the national power supporting it. Mr. 
Frank A. Vanderlip expresses himself as follows on 
this subject: ^ 

We will hold but loosely that trade which we attempt to 
grasp not because we can hold it with true economic force, 
but because for the moment, our competitors are placed at 
a disadvantage . . . 


Describe the traditional attitude of the American citizen and 
American busmess man towards foreign affairs and foreign trade. 
What was the reason for this attitude, and what forces have in 
recent years tended to modify it? 

Explain the four stages of economic development which are 
reflected in the visible balance of trade with foreign countries. 

Compare present conditions in American export trade with 
those of a generation ago. Why do recent tendencies impose 
new obligations? 

If the European war has greatly stimulated our production ca- 
pacity, how can this increased output be maintained when the 
war closes? 

Note the ten recent tendencies of our foreign trade, and 
enumerate the various facts and agencies which may be impor- 
tant in promoting the export of manufactured products. 

1 The Americas, February, 1916. 



1. Former isolation. — Canada in the early years of 
her development had no paternal Washington to lay 
down for her a policy of politico-commercial isola- 
tion, but from other sources decrees just as imperative 
went forth. The result has been that while the United 
States manufacturers as a class are still novices in the 
ways of foreign trade, Canadian manufacturers are 
even more amateurish. The youthfulness of the na- 
tion, a high tariff centering interests at home, a lack 
of confidence in her ability to compete with highly- 
specialized corporations of the United States, and the 
existence of certain manufacturing disadvantages in 
Canada are among the factors that explain the former 
absorption of Canadian manufacturers in the sheltered 
home market, and their timidity in venturing forth 
upon the ocean of world trade. Their typical atti- 
tude is illustrated by the oft-heard words: — "Why 
should I bother with the trouble and risk of trading 
with the ends of the earth, when I have a big enough 
job here at home." A result of this attitude, with 
a few notable exceptions, was that Canadians did not 
concern themselves with foreign markets; they 
thought of them as possible outlets only when the 
home market was depressed. 



2. Canada's commercial policy. — It would not of 
course be correct to say that Canada has not had a 
national commercial policy. It has had a national 
policy, characterized by an attempt to retain the home 
market for domestic manufactures, and for the rest, 
by an heroic endeavor at whatever cost, to direct 
national growth along the lines of greatest resistance. 
The Dominion deliberately set itself to the task of 
building up a separate nation on the northern half of 
the Continent and forced human nature to triumph 
over the laws of economics and geography which would 
confine transportation, trade and social existence to 
lines running north and south instead of east and west 
as at present. Canada resolved to cast in her lot 
with the United Kingdom rather than with the United 
States, to restrict trade with the latter country lest 
too close commercial relations might involve political 
subordination, and to remain an integral part of the 
British Empire bearing the sacrifices and reaping the 
rewards that such a connection might bring. So we 
find the giving of the British Preference in 1899 de- 
signed to encourage the flow of trade into Imperial 
channels, and the attempting more recently by Can- 
adian Ministers to find markets in remote parts of 
the world. These resulted in the signing of commer- 
cial treaties with the British West Indies, France, 
Italy and a number of other nations. Canada has 
now an elaborate four-scheduled tariff which, if tariff 
negotiations can open doors to trade, should prove 
effective for that purpose. 


3. General character of Canada's foreign trade. — 
What has been said ah*eady concerning the indiffer- 
ence of manufacturers does not mean that Canada's 
foreign trade is non-existent or unimportant. On the 
contrary it has shown in the last twenty years an 
expansion to which only that of Argentina can com- 
pare. Between 1895 and 1914 the total of foreign 
trade increased over five-fold — from 224 million to 
1,130 million, and total exports over four-fold — from 
114 milhon to 479 million. 

As in the United States, and to an even greater 
extent, Canada's export trade consisted largely of 
foodstuffs and raw materials. The greatest and 
steadiest growth, moreover, in this twenty-year boom 
period was in the case of those products which make 
the least demands on the labor force. Wheat and 
other grains, forest products, seeds (chiefly flax), 
flour, cheese, copper, hides and cattle are among the 
most important items. Of manufactured goods, the 
greater part of the exports consisted of such com- 
modities as flour, bacon, cheese, canned salmon, wood- 
pulp and lumber products. These represent the first 
working up of natural products and are usually 
classified under farm, sea or forest products. Among 
the more highly manufactured articles, paper, agri- 
cultural implements, automobiles, iron and steel goods, 
leather, carriages, aluminum, chemicals and cottons 
go farthest in swelling the export figures. 

It is significant that the United Kingdom takes 
49 per cent of Canadian exports and sends ordinarily 


only about 24 per cent of the imports ; that the United 
States buys 37 per cent of the total exports and sells 
to Canada over 64 per cent of her imports. This con- 
dition exists in spite of the persistent political en- 
deavor to find wider markets and the negotiations 
of commercial treaties; no other one country counts 
for 3 per cent of Canada's exports or imports. 

4. Canada formerly in the first stage. — Previous to 
1914 Canada was in the first of those economic stages 
thru which most countries pass. A young and unde- 
veloped nation, she had been borrowing, especially 
since 1902, enormous amounts of foreign caj)ital. 
These loans were primarily to finance the opening 
up of the "Last Best West," to provide the railways, 
towns, elevators and other equipment required b}^ the 
thousands of immigrants who were being attracted 
to Canada by a spirited immigration policy. The 
total amount already borrowed for these and other 
purposes is approximately $3,725,000,000, of which 
$2,914,000,000 came from Great Britain and $637,- 
000,000 from the United States. When taken in con- 
junction with the figures for Canadian imjiort trade, 
this shows that American goods financed the English 
loans to Canada. In the years immediately preceding 
the European war, Canada's annual borrowings were 
roughly $300,000,000. This was nation-building at 
an unprecedented rate and, after 1902, was reflected 
naturally in a huge and rapidly expanding unfavor- 
able balance of trade. In the calendar year 1913, 
this excess of imports amounted to $270,000,000. 


Many of the recent criticisms of Canada's profligate 
borrowing involved certain mercantilistic fallacies. 
The only important problem was to insure that bor- 
rowed capital was being invested so as to result in 
productive retui'ns. However, the country was soon 
bound to face the problem of testing the wisdom of 
its investments by their productivity, and to find some 
more satisfactory way of paying its interest account 
than by additional borrowings. In short, the situa- 
tion facing Canada just before the outbreak of the 
war was to change from an excess of imports to one 
of exports and to pass from the first to the second 
economic stage — a transition effected in some coun- 
tries by a slow and silent process, in others by a finan- 
cial crash. 

5. A sudden reversal in the trade balance. — In Can- 
ada the transition to the second stage was accom- 
plished as if by magic, in two short years. The com- 
plete story is clearly told by the following figures for 
the four calendar years ended in 1916: — 

(Millions of Dollars) 

Merchandise 1913 19 H 1915 1916 

Imports 488 481 451 767 

Exports 218 428 653 1,112 

Unfavorable balance 270 53 

Favorable balance 202 345 

Such an achievement involved a change in the balance 
of $615,000,000 and an increase in exports of 410 per 
cent in four years. 


Canada's annual interest charges are now estimated 
at $195,000,000. With her present surplus of ex- 
ports, she can meet these charges and still have to her 
credit $150,000,000. On short time account at least, 
the war has transformed her from a debtor to a credi- 
tor nation. In other ways Canada has recently de- 
veloped international relations which may have far- 
reaching effect on her trade position in the early 
future. Canada is now finding herself financially, 
finding herself with a variety and independence in 
capital resources undreamed of before. This augurs 
well for the future upbuilding of her trade. 

6. Will the change prove permanent? — Opinions 
differ as to whether the increased exports and the 
favorable balance will prove permanent or not. Some 
fear a slipping back to the old conditions. This much 
at least is certain. Those who believe that since the 
trade balance has been reversed and the nation has 
become a creditor nation on short-time account, Can- 
ada will no longer be a borrowing nation but rather 
will be able to extend her trade by investing consider- 
able capital in foreign countries, are doomed to disap- 
pointment. Canada has scarcely reached the third, 
much less the fourth stage in her national develop- 
ment. The necessity of funding short-term borrow- 
ings of the war, of financing the coming railway reor- 
ganization, and more importantly, of developing her 
rich resources, will for many years make Canada a 
bidder for the world's surplus capital. 

As has been stated, the war has revealed domestic 


capital resources in unsuspected magnitude. But 
these, tho probably subject to continuous increase un- 
less, as is not probable, tax burdens prove exhausting, 
will need to be supplemented from abroad. Great 
Britain will be drawn upon once more, tho probably 
on a smaller scale than in the previous boom period. 
For the rest, resort must be had to Canada's new- 
found banker, her southern neighbor. Geographical 
proximity, bringing similarity in commercial needs 
and methods and facilitating personal investigation; 
the soundness of Canada's political and financial con- 
ditions, especially in contrast with alternative outlets 
for capital ; the stake held already in the counti-y thru 
emigration of farmers and branch factories ; the pres- 
ent extent of trade relations; the appeal of virgin 
opportunities — these and other forces will inevitably 
draw to Canada a major portion of the surplus wealth 
and loaning power which recently has been brought 
to the United States. 

7. Necessity for increased production. — Altho 
Canada may continue to be a borrowing country, she 
will probably not go back to the first stage of economic 
evolution. In the first place, the annual loans will 
probably not be so great as in the record years 1912 
and 1913. In the second place, most of the national 
plant has now reached the paying or productive stage, 
and the nation is going to gird its loins for a tremen- 
dous increase in production. An attempt marked 
by greater energy and better organization, b}^ more 


cooperation and less state-blindness, to garner the 
utmost harvest from forest and mine and sea and 
factoiy, must and will be made in order to secure a 
larger share of the home market in certain favorable 
lines and to build up a surplus of exports at least 
sufficient to pay the interest charges on accumulated 

8. What lines of production should he stimulated? 
— While there is room for increased production and 
export in all lines, we would have a wrong perspective 
if we did not see the predominant importance of pri- 
mary production. First things must be put first. 
For Canada, at this stage the foremost requisite is 
to increase her basic products. As a nation she is 
justified in concentrating her energies, for the most 
part, on the export of foodstuffs and crude, or semi- 
crude materials, for it is chiefly in these lines that her 
people have a relative advantage over other countries, 
an advantage due primarily to nature's generosity in 
the provision of resources. In the score of years just 
past, huge sums of capital were spent mainly on indus- 
trial development of a secondary character, and only 
a surprisingly small percentage of the total borrow- 
ings was devoted directly to the extension and im- 
provement of agricultin'e, mining, fishing and other 
primaiy industries upon which the chief burden of 
all the investments will ultimately fall. The good 
result of it, however, is that the country now possesses 
a national plant for production, almost completely 


equipped in such departments as transportation, com- 
munication, city development, and other similar fa- 

With this as a foundation Canadian production 
should go forward rapidly in all lines, especially in 
the basic industries. In agi'iculture, in which credita- 
ble progress has been made, there is room for almost 
indefmite expansion. It has been estimated, for in- 
stance, on the basis of investigation into actual farm- 
ing methods conducted by the Commission of Con- 
servation, that thru greater attention to weed control,- 
proper rotation of crops, seed selection and other farm 
processes, the field crops of Canada could be doubled 
within twenty years without any addition from the 
occupation of new lands. The opportunity for and 
the urgency of building up the live stock industry are 
unquestioned. In all branches, indeed, of this indus- 
try which will remain the industrial backbone of Can- 
ada, all that is needed is more men, more capital and 
more science in order to swell the volume of Canada's 
exportable surplus. 

Equally favorable are the opportunities for in- 
creased exploitation of the forests. As the available 
stand of commercial timber is estimated at from 400 
to 700 billion feet, lumbering operations can be greatly 
extended without endangering the future timber sup- 
ply. Investigation of available supplies, prevention 
of fire and other wastes, and the adoption of scientific 
conservation principles are imperative. In British 
Columbia, which has an estimated timber stand of 


over 300 million feet, it is said that increased exploita- 
tion depends largely upon the building up of foreign 
trade thru better shipping facilities, strong selling 
organizations and general improvement in the ma- 
chinery for capturing and retaining foreign business. 

In fishing and mining there is the same story of 
inadequate exploitation today and great possibilities 
of expansion tomorrow. The increase in the value of 
the output and export of the fisheries in recent years 
has been due almost solely to rising prices. But al- 
ready steps have been taken to improve packing, cur- 
ing and marketing methods, and in order to increase 
still further the quota from this source of natural 
wealth it is only necessary to take well-recognized sci- 
entific steps to prevent the impending depletion of 
certain of the valuable fisheries. 

Canadian exports of minerals have not been increas- 
ing so rapidly as one would expect judging from the 
extent and variety of wealth in this respect. This 
is due to the fact that Canada has been exporting 
unrefined ores, the value of which is much less than 
that of the refined product. Recommendations have 
been made — and steps have actually been taken in 
the case of nickel, zinc, copper, etc. — to secure do- 
mestic refining of Canadian minerals, both for home 
consumption and for export, and to establish such 
basic industries as the smelting of all metals, the manu- 
facture of nitric and sulphuric acid and of nitrogen 
products from the air, the by-product coking of coal, 
etc. These are really manufacturing industries and 


the considerations suggested in the next following 
section will be applicable. 

In his annual address the President of the Bank of 
Montreal, said that there were three objects to which 
Canadians should bend every effort if they were not 
to slip back into pre-war conditions — economy, pro- 
duction and immigration. Add to these conservation 
or scientific utilization, and provision of marketing 
facilities, and you will have in a nutshell the forces 
which will determine, and the only forces which need 
limit Canada's export trade in so far as natural prod- 
ucts are concerned. 

9. Manufacturing in Canada, — As explained in the 
preceding chapter the basic economic principle of 
national exports is that a nation should export those 
commodities in the production of which it enjoys a 
relative advantage. Canada is not at present able to 
compete with the great manufacturing nations of the 
world. There are many commodities on which she 
has already built up or could build up a successful 
and permanent export trade. It is to such lines and 
to such lines only, unless in certain markets prefer- 
ences are extended which counterbalance extra cost, 
that Canadian exporters should devote their exclusive 
attention. Among the goods that Canada should pro- 
duce on equal terms with the world — or perhaps on 
even better terms — are certain lines of iron and steel 
products, agricultural machinery, flour and cereals, 
paper and pulp, wood and the manufactures thereof, 
leather goods, wagons and carriages, aluminum. 


nickel and nickelware, etc. In some of these lines ex- 
cellent pioneer work has already been done by a num- 
ber of the larger Canadian corporations whose success 
in the foreign field is both a guide to the smaller manu- 
facturers who may follow, and a proof of what Can- 
adian enterprise can do. 

10. Her present opportunity, — In the past rela- 
tively little attention in Canada, as in the United 
States, needed to be paid to methods and conditions 
of exporting because by far the major portion of the 
exports consisted of foodstuffs and raw materials 
which, owing to the staple world demand, practically 
market themselves. As Canada, however, attempts to 
place her manufactured goods in open competition 
with the rest of the world, the necessity for training 
and cooperation, for a systematic and energetic cam- 
paign, will soon become strikingly apparent. 

Leaders in many walks of Canadian life have 
pointed out the ideal opportunity that is now offered 
in the export field and the vital necessity of grasping 
it in time. The way in which Canadian manufac- 
turers responded to the demands of war was a revela- 
tion to them of their own power ; an indication of what 
could be accomplished under the spur of great events, 
even if not an accurate index of what is possible under 
normal conditions. 

Canadian manufacturers have now a better and a 
larger plant than ever before, one too large in many 
lines for the requirements of the home market. Altho 
much of the special war machinery may have to be 

XV— 4 


scrapped at the end of the war, yet many manufac- 
tui'ers will find themselves with new and up-to-date 
machinery for ordinary production. They will also 
find themselves with a skilled force of mechanical 

Manufacturers have built up strong export con- 
nections. Many of the secrets of exporting have been 
opened to them. They have become acquainted with 
foreign markets and in many cases have established 
relations with foreign importers. Many foreign im- 
porters have become acquainted with Canada for 
the first time and have been awakened to the multi- 
plicity and quality of the commodities which that 
nation can supply. Finally, in the minds of some 
thinkers the most important advantage will be the 
preference — either a sentimental one or one of a more 
substantial kind in the form of tariff favors — which 
Canada will possess over neutral nations in the mar- 
kets of the allied countries as a reward for her parti- 
cipation in the war. Already over fifty American 
companies have expressed their belief in this idea by 
establishing branch factories in Canada in order to 
handle their export trade to the markets of the British 
Empire and the other allied countries. 

11. Efforts that have been made to promote trade. 
— Many of the progressive business men of Canada 
have already established export departments in their 
business so as to be in a position to make a strong 
bid for business when normal conditions are again 
restored. An ably managed and well organized ex- 


port association, the Export Association of Canada, 
has been formed and in its active operation is backed 
by the Canadian Manufacturers' Association. 

Most of the initiative, however, that has so far 
accomphshed results has come from governmental 
sources. Ottawa is leading the way — tho criticisms 
are constantly made, urging, for instance, that busi- 
ness men should be pushed if they will not lead, and 
that enough compulsion should be used to make the 
trade conference it proposes a fact and a success. The 
department si^ecially concerned has taken a number 
of good practical steps to that end. 

The Minister of Trade and Commerce has proposed 
to improve the work of his department by the building 
uj) of a museum or bureau of commercial information, 
designed as a clearing-house for commercial and busi- 
ness information in regard to Canada and foreign 
countries. This bureau would place on permanent 
exhibit at Ottawa samples of domestic manufactures ; 
samples of goods demanded in foreign markets, which 
might be made in Canada; samples of goods now im- 
ported, which might be made in Canada ; and samples 
of all raw materials, etc., illustrating the natural 
resources of that country. This promised develop- 
ment is in response to the frequent demands for a 
Canadian institution analogous to the Commercial 
Museum of Philadelphia. 

Mention should also be made of the work of the 
Economic and Development Commission which is in- 
terested in the extension of foreign trade; of the 


Dominions Royal Commission, which has been taking 
evidence in regard to natm'al resources and condi- 
tions of trade in Canada and thruout the Empire, and 
which will probably bring results of great value by 
making known those varied resources and by recom- 
mending the removal of obstacles or hampering re- 
strictions on the trade of the Empire. Of interest 
also is the recently appointed Advisory Council for 
Scientific and Industrial Research, which will seek to 
apply the scientific principles of technical research to 
the industrial and commercial problems of Canada. 
The importance of this last body cannot be exagger- 
ated, as will readily be recognized by a reading of a 
list of the larger projects it has already in hand — a 
comprehensive industrial census ; the training and util- 
ization in industrial establishments of "efficiency ex- 
perts"; the creation of technical laboratories under 
state cooperation at the great industrial centers to 
give free help to manufacturers in solving their prob- 
lems; the provision of scientific research scholarships 
and the commercial utilization of by-products. Can- 
ada cannot afford to be behind any nation in the world 
in efficiency of production if she is to win her proper 
place in the fierce race for success in trade which is 
bound to follow the resmnption of normal world con- 


"What factors have shaped Canada's present commercial pol- 

Account for the attitude of the typical Canadian manufacturer 
to foreign trade. 


In what stage of economic evolution was Canada before the 
war? Account for the recent changes in trade balance and esti- 
mate its significance. 

How have Canada's borrowings affected her foreign trade in 
the past? Estimate the character of this influence in the future. 

What lines of production and export should be stimulated in 
Canada .'' 

Enumerate the steps which have so far been taken to facilitate 
Canada's export trade. 



1. Nature of world trade. — It is easy to forget 
that world-wide trade is a modern phenomenon. 
Only a hundred years ago the overwhelming majority 
of people, even in the most advanced countries, lived 
almost exclusively upon domestic products. Foreign 
imports were chiefly luxuries; they did not figure in 
the life of the masses. The man of a hundred years 
ago was clothed in wool that had never crossed the sea ; 
his house was built of stone broken from a nearby 
quarry, or of timbers hewn in the neighboring forests. 
His food, if it was not raised on his own farm or in his 
own vegetable garden, came from no great distance. 
All this has changed. 

Now the French workman wears garments the raw 
material for which comes from the cotton fields of 
Texas or Louisiana. The English laborer serves Aus- 
tralian mutton or Argentine beef on his table. The 
steel of his knife is made of foreign ore; his tea was 
grown under the sun of Ceylon; his bread is the 
product of Canadian wheat. 

What was the exception fifty years ago is the rule 
today. The very necessities of life, even those of the 
poorest classes, are brought from the most distant 



corners of the world. A man's locality used to be his 
home, his som-ce of supplies and his market. It is so 
no more. The change has been brought about by the 
utilization of the great inventions which have revolu- 
tionized transportation. 

2. Growth of world trade. — In 1810 the value of the 
combined imports and exports of all the leading coun- 
tries amounted to less than $5,000,000,000. In 1910 
this total had risen to almost $33,000,000,000. These 
figures are a measure of the change in the world's 
international commerce, the shifting from one corner 
of the globe to another of huge volumes of staple 
products and of bulk commodities. Instead of the 
spices of India and the rare luxuries of China, which 
filled the tiny holds of early sailing vessels, the cargo 
of a steamer today consists of thousands of tons of 
coal, hundreds of thousands of bushels of wheat, and 
trainloads of bananas. 

3. Fundamental causes of international trade. — 
International commerce is the result of differences 
between the natural resources of various countries. 
Because of these differences, it becomes profitable, and 
sometimes necessary, for nations to exchange their 
surpluses. But this geographic phenomenon is largely 
influenced by two important factors — the racial char- 
acteristics of peoples, and the respective stages of their 
economic development. 

Racial differences are largely the result of climatic 
conditions. Along the lines of the various zones of 
latitude, the human race is divided into classes of 


peoples, industrious and non-industrious, intelligent 
and dull, enterprising and backward. Moreover, 
among different nations that are in the same latitude 
and subject to the same climatic conditions, we find ra- 
cial differences which are due to historical, geological 
and other causes, differences which strongly affect the 
development of their economic life. Thus, the French 
show extraordinaiy skill and taste in art ; the Germans 
are known for their painstaking thoroness, for their 
scientific skill and for their thrift ; and the Americans 
set an example in resourcefulness and keen enterprise. 

Racial differences tend to be eliminated, however, as 
the various nations are thrown into the great melting 
pot of international trade and commerce. The 
struggle for the world's markets forces each to adopt 
the virtues and achievements of its rivals; each tries 
to learn from the others, and is anxious to adopt what- 
ever customs and methods have proved conducive to 

4. Differences in the stage of economic develoj)- 
ment. — The effort to forge ahead causes a constant 
shifting in rank among the nations of the world, and 
the more gifted nations come to the top. This evolu- 
tion radically affects international trade. There is a 
general tendency toward emancipation from foreign 
industrial supremacy. Once England was the work- 
shop of the world, but one nation after another, by 
means of fiscal measures and definite national policies, 
has freed itself from dependence upon British indus- 
tries. Germany, France, the United States, and 


Japan, have become industrial nations, and even 
young countries like Canada and Australia have made 
great sacrifices to build up national industries. 

Under the leadership of England, economic writers 
formerly saw an ideal solution of international rela- 
tions in the policy of free trade, which meant, to them, 
the division of the world into agricultural and indus- 
trial nations exchanging their surpluses for mutual 
benefit. But since the middle of the nineteenth 
century a very different idea, of which the chief advo- 
cates are the United States and Germany, has been 
gaining ground — namely, the idea that the welfare of 
a nation is best promoted by the largest possible 
development of all its national resources, irrespective 
of the fact that, in the beginning at least, it would be 
cheaper to purchase most manufactured articles 
abroad. As this viewpoint came to be widely ac- 
cepted, it was reflected in the fiscal policies of most of 
the commercial nations of the world which, with the 
exception of Great Britain, abandoned the old free- 
trade principles and constructed tariff walls around 
their respective territories, in order that, so protected, 
they might be able to develop their natural resources to 
the largest possible extent. This tendency toward 
protectionism has lessened the importance exerted by 
the influence of international differences in economic 
development, since, when protection is practised, these 
differences tend to be eliminated. 

5. Differences in natural resources. — The effect 
upon international commerce of international differ- 


ences in economic development and in racial character- 
istics is less now than formerly. Therefore, the 
importance of the fundamental basis of international 
trade — differences in natural resources — increases. 
This factor really includes more than the existence of 
natural resources ; it includes also those conditions that 
make the resources accessible and useful to man — such, 
for example, as topography, humidity and dryness, 
temperature, and proximity to navigable streams or to 
tidewater. The coal fields of China are dormant 
treasures, useless until railroads are built by means of 
which the coal may be brought to the seashore. The 
minette ore of Luxemburg and Lorraine was of little 
value until the inventions of Thomas and Gilchrist 
made the process of converting this ore into iron and 
steel a profitable one. The valley of the Nile multi- 
phed many times in value when the Assuan Dam 
insured for it the necessary irrigation and freedom 
from the devastation of floods. The soil of Mesopo- 
tamia, perhaps the richest in the world, is buried under 
desert sand, awaiting the day when modern engineer- 
ing shall restore the irrigation which Nature has with- 

6. Effect of natural resources on the trend of world 
trade. — The differences between the natural resources 
of various countries will be the decisive influence in the 
future development of international trade, and will 
sooner or later effect a change in the trend of foreign 
commerce. Today, the trend follows the parallels of 
latitude; that is to say, it runs from east to west and 


not from north to south. This is because today 
foreign trade is still largely the result of differences 
between the stages of development of various countries 
and continents in the Temperate Zone. But the more 
the process of leveling and assimilation proceeds, the 
more prominent will become the differences in natural 
resources and climatic conditions. These natural 
elements tend to influence trade to move between dif- 
ferent zones — that is, north and south. Long after 
we have ceased shipping wheat to Liverpool and Rot- 
terdam, we shall still be getting coffee from Brazil, 
hides from Argentina, sugar from Cuba, and wool 
from South Africa. The quantity of this country's 
imports from Europe has not grown so rapidly during 
the last fifty years as the imports of tropical products, 
like cocoa, coffee, fibers, rubber, indigo, ivory, olive oil, 
rice, sugar, tea and tobacco. This increase of imports 
from the tropics will be observed in connection wdth 
the most important branches of world trade now to 
be described. 

7. International coal trade. — The shipping world 
judges the importance of commodities by the amount 
or number transported. According to this standard, 
coal heads the line of the world's staple commodities. 
We live in an age of coal and iron and, of the two, 
coal is the more voluminous and is scattered more pro- 
fusely over the earth. Great Britain has had, and now 
has, by far the largest share of the world's coal trade. 
The proximity of British coal deposits to suitable 
harbors early indicated to the British coal-producer 


the opportunity of widening his market. An 
anonymous writer of the fifteenth century tells us that 
even then the exportation of coal was the main cause 
of the British merchant fleet's existence, and that all 
other trades were to be considered as merely branches 
of this trunk. The quality of British coal is such 
that a ready foreign market for it is assured. It looks 
as if foresight on the part of Nature were responsible 
for the fact that the coal produced in the Newcastle 
region, which lies nearest the Continent of Europe, is 
most suitable for use in inland industries and for 
household purposes, as well as for the making of gas ; 
while the coal of South Wales, which is situated on 
the trade routes between England and the oversea 
world, is particularly suitable for marine use. It is 
this coal of South Wales which is distributed to the 
numerous coaling stations that Great Britain main- 
tains at strategic points in all seas. 

8. Extent and significance of British export coal 
trade. — It is not generally realized what an enormous 
export coal trade Great Britain carries on, or what 
its value is to the entire economic life of the United 
Kingdom. In addition to the 30 or 40 million tons of 
coal, that annually leave the British Isles in the bunker 
holds of outgoing vessels, Great Britain in normal 
times exports over 60,000,000 tons of coal every year. 
In normal times the world's annual exports of wheat 
and flour amount to about 715,000,000 bushels, or less 
than 25,000,000 tons. The value of the British coal 
export trade lies less in its importance as a source of 


revenue than in its utility as a return cargo to be 
balanced against the millions of tons of raw materials 
that converge upon northwestern Europe. A later 
chapter will deal with this aspect of the question and 
will also discuss the question of developing American 
coal exports. 

9. German foreign trade in coal. — Of late years 
Germany also has systematically developed her coal- 
export trade. She has done this in accordance with 
the far-reaching policy of the Rheinish-Westphalian 
Coal Syndicate which, thru the port of Rotterdam, 
now reaches such distant ports as Buenos Ayres and 
Rio de Janeiro. The considerations that suggested 
this pohcy were simple. It seemed advisable for 
Germany to develop a coal trade that would enable 
her to be independent of the British supply of bunker 
coal. Then, too, it was hoped that the price of Argen- 
tine wheat could be reduced, by giving the vessels that 
transported it to Germany, a return cargo from Ger- 
many. But the German export coal trade is small 
compared to the British, and is nearly equalled by the 
importation of British coal via Hamburg. 

10. World-wide distribution of British coal. — 
British coal has a market in nearly every part of the 
world, tho some of the foreign markets have been con- 
tested by foreign products. Japanese and Australian 
coal is now competing with the British product in the 
Indian market. The bulk of British coal exports goes 
to the Continent of Europe, especially to the regions 
entirely dependent on foreign coal, like Norway and 


Sweden, Italy and Spain, Switzerland and Greece. 
Even France is unable to supply its demand of coal 
from its own resources. 

11. Future of the coal trade. — It is impossible to 
predict the future of the world's coal trade, since one 
cannot foresee at this time to what extent the present 
situation will be changed by discoveries of new coal 
deposits in regions like South America and China. 
Then, too, the increasing utility of oil as a marine fuel 
may, in time, entirely change the present situation of 
the coal trade. So, also, may the development of 
water power. Within a calculable time there wiU be 
an exhaustion of certain coal fields, and the result may 
be a complete shifting of the source of coal exports. 

12. Iron ore. — Along with coal, iron ore is the 
foundation of our present industrial civilization. Be- 
cause of the small amount of iron ore deposits in some 
of the countries of the world, it is necessary for others 
to ship great quantities over the seas. While the iron 
and steel industries are largely concentrated in the 
most highly developed nations, ore is found in many 
backward countries like Cuba, Brazil, Northern 
Africa and China, countries which have not yet 
reached the stage necessary for the development of 
iron and steel manufacture. British iron masters 
depend largely on the iron ore brought from Bilboa, 
Spain, and have now under consideration the importa- 
tion of Chilean ores. The Bethlehem Steel Corpora- 
tion has already arranged to import ore from Chile. 
Brazil is getting ready to make large exports of iron 


ore thru Victoria. The United States Steel Cor- 
poration has bought the famous iron mountain of 
Durango, Mexico, estimated to contain 300,000,000 
tons of iron. The necessity of mixing various quali- 
ties of ore in order to produce a desired quality of steel, 
makes the importation of iron ore necessary even in 
countries which themselves produce large quantities. 

13. International grain trade. — Grain which is 
raised in all parts of the world occupies the second 
most important position in foreign trade. Of the 
world's total grain crop, only a relatively small portion 
is brought to tidewater and shipped from one land to 
the other. It is a very essential staple product, and 
is generally raised to be consumed by those who grow 
it, and by their immediate neighbors. It has come to 
figure in international trade only as a result of our 
super-civilization — its crowded cities and deserted 
fields. For always, as the industrialization of a coun- 
try proceeds, its land becomes too valuable for agri- 
cultural production in competition with the cheap land 
of colonies or new countries, which specialize in pro- 
ducing foodstuffs and raw materials, and sell in 
exchange for the manufactures of the industrial 

So we find that today over one-tenth of all the 
cereals are bought and sold in international commerce. 
More of wheat and barley than of the other cereals is 
produced for oversea consumption. The following ta- 
bles show: (1) the world's production of the most im- 
portant cereals in the year 1913, and the exportation. 



in millions of bushels; and (2) the average exports of 
wheat, corn and oats from the principal surplus- 
producing countries for the years 1911, 1912 and 1913. 






Per Cent 


Exports in 



mill, tons 

at 2,240 lbs. 

a ton 




































1 Barley exports also include malt reduced to terms of barley. 

COUNTRIES DURING 1911, 1912 AND 1913 























































rTn1f,R(i Rtfltfia 





"Rritish So. Afrina 


Rritish Tndift 



Austria Hungary,^ 
Chile, Servia j 



The United States is becoming industrialized so 
rapidly that it must look upon the exportation of its 
cereals as only a temporary and transitory part of its 
development. Nevertheless, today the exportation 
of cereals plays an important part in our trade, 
whether it be measured by value or by weight. 

14. The wheat trade. — The cereal which plays the 
most important part in international commerce is 
wheat. The greatest wheat-exporting countries are 
Russia, the Argentine Republic, the United States, 
Roumania and Canada. In 1870 Russia exported 
about 62,000,000 bushels, the United States had 
increased her export to almost 170,000,000 bushels, 
while that of Russia had decreased to barely 
40,000,000 bushels. Later, the Russian exportation 
of wheat increased rapidly — excepting for a slump 
about 1900— to a maximum of over 225,000,000 
bushels per year, while that of the United States suf- 
fered a decline, especially noticeable in 1900, until, 
in 1910, our export had been reduced to 60,000,000 
bushels. The Canadian wheat exports grew slowly 
until about 1895. From that time on there was a 
steady increase, from about 9,000,000 bushels, to 
158,000,000 in 1916, or an average of 117,000,000 in 
the last three years. The Argentine grain export 
trade developed more rapidly. In spite of very mod- 
est beginnings, its exports of wheat amounted to more 
than 100,000,000 bushels in 1913. In the same year 
the Roumanian wheat exports exceeded those both of 

XV— 5 


the United States and of Canada, but since then a drop 
has occurred. Manchuria, whose port is Vladivo- 
stock, promises to become an important wheat-export- 
ing country. 

There are other countries that export wheat, such 
as British India and Australia, but, owing to climatic 
conditions, the wheat exports of those countries 
fluctuate to such an extent that they have not yet 
gained an important position in the world's wheat 

The following table shows the wheat trade and 
wheat production of the world's most important 
wheat-exporting countries during the last peace year 



Importing Countries Million Bushels Yield per acre 

Crop 1913 Imports 1913 in bu. 1910 

Belgium 14.8 69.8 • 40.0 

Brazil 24.7 

Brit. So. Africa 9.4 

Denmark 6.7 8.9 37.8 

France 321.0 57.7 21.8 

Germany 171.1 94.5 30.5 

Greece 7.0 7.0 

Italy 214.4. 66.6 16.3 

Japan 26.9 7.1 20.8 

Netherlands 5.2 89.5 

Portugal 9.2 6.4 

Spain 112.4 6.4 

Sweden 9.3 7.8 

Switzerland 3.5 21.4 34.2 

United Kingdom ... 58.4 227.0 34.3 

Other countries 71.8 




ExPOKTixG CouxTBiES Million Bushels Yield per acre 

Crop 1913 Exports 1913 in bu. 1913 

Argentina 187.4 109.6 

Australia 94.9 53.2 

Austria-Hungary 232.2 1.7 19.9 

Belgium 14.8 16.0 

British India 362.7 54.7 10.9 

Bulgaria 51.3 11.5 12.4 

Canada 231.7 152.0 21.5 

Chile 23.6 2.2 

Germany 171.1 29.6 35.1 

Netherlands 5.2 64.5 

Roumania 83 . 2 54 . 2 .... 

Russia 838.0 130.6 13.5 

Serbia 10.5 3.7 

United States 763 . 4 154 . 8 15.2 

Other countries 20 . 2 .... 

1 Flour is reduced to terms of grain, where included in these columns, 

by assuming one barrel of flour to be the product of 43^ bushels of 

15. Intensive and extensive wheat production. — > 
The table just given reveals the great difference in the 
yield per acre between the various wheat-producing 
countries. It also clearly shows the difference be- 
tween the methods of agricultural production used in 
old and new countries respectively — in other words, 
the difference between intensive and extensive agricul- 
ture. To some extent, also, the difference in the 
quality of soil enters into the question. Thus the 30.5 
bushels per acre raised in Germany in 1909 were 
probably the result of more intensive and more scien- 
tific farming than the 34.3 bushels raised on the acres 
of the United Kingdom in the same year. The sandy 
soil of Germany needs a more careful treatment than 
the more fertile land of the British Isles. 



16. Seasonal character of the wheat trade. — One of 
the most important facts of the wheat trade, from the 
standpoint of shipping, is that the harvest occurs at 
various periods in the year in different parts of the 
world. In this respect, the southern hemisphere 
complements the northern hemisphere. The seasonal 
difference in wheat production makes it possible to 
employ efficiently the shipping tonnage engaged in 
carrying to European markets the surplus wheat 
crops of the Argentine, the United States, Canada 
and Australia. 









OF Wheat Harvest in Various Countries 

Australia, New Zealand, Argentine Republic, 


India, Upper Egypt. 

Mexico, Cuba, Lower Egypt, Syria, Persia, 
Asia Minor. 

Morocco, Algeria and Tunis ; the northern 
parts of Asia Minor, China, Japan, Texas, 

The Mediterranean Peninsulas and the South 
of France, California, Oregon, Utah and the 
greater part of central and eastern United 
States territory south of 40° ; Afghanistan, 

France, Austria-Hungary, southern Russia, 
Roumania, the northern parts of the United 
States, Ontario and Quebec. 

England, Belgium, the Netherlands and Ger- 
many; the eastern parts of the Dominion of 

Scotland, Sweden, Norway and Russia. 

Finland, Northern Russia. 

Peru, South Africa. 

Burma, South Australia. 


The foregoing table shows the months during which 
the wheat harvest is at its height in various parts of 
the world. It shows that at any time of the year a 
cargo of wheat can be obtained somewhere by a vessel 
seeking to carry it. 

17. Corn crop. — The most important crop of this 
country is the corn crop. It is the only grain that 
the old world owes to the new. Corn was extensively 
cultivated by the American Indian before the dis- 
covery of this country by Columbus. It is a very, 
productive crop and, as a rule, yields twice as much 
grain to the acre as wheat. The cultivation has spread 
rapidly in many parts of the tropical zone and in the 
warmer regions of the temperate zone. 

During the year 1913, the world's corn crop 
amounted to 3,587,400,000 bushels, of which the 
United States produced almost two-thirds, 2,446,- 
988,000. (In 1915 this country produced 3,054,535,- 
000. ) The remainder was distributed largely among 
jMexico, Argentina and the countries of the Danube 
Valley. Altho Argentina has only recently begun to 
grow corn, it at present exports a larger amount than 
the United States. This fact is shown by the table 
already given, on page 46. 

18. Other cereals and starch foods. — As the fol- 
lowing table will show, Russia is the largest j^roducer 
of barley. 

Barley, which enters into international commerce 
only to a very limited extent, is used in brewing and 
as a forage crop where corn cannot be grown. It is 



grown extensively in Russia, since corn does not thrive 
there as it does in this country. 


(Million bushels) 





Russia in Europe 




United States 




German Empire 












United Kingdom 
















In some parts of Asia rice is the main crop, and it 
constitutes the principal means of subsistence in 
China and Japan, India, Indo-China and the East 
Indian Islands. There, both the humid air and the 
wet soil facilitate its production. But because rice 
is not moved from one country to another, like wheat, 
its significance in international trade is small. 

The same is true of the potato, which possesses a 
very important food value, but which figures little in 
over-sea commerce. The potato is a starch food. 
There is only one food of this class that plays an im- 
portant part in international trade — the banana. This 
fruit was for a long time exported almost exclusively 
from the Canary Islands to Great Britain. The de- 
velopment of the West Indies, largely thru the enter- 
prise of the United Fruit Company, has opened a 
new source of supply for the banana. Improved 
shipping service and the j)erfection of refrigerator 


facilities in transportation on land and sea have 
made it a staple of both American and west European 
diet. A product which has recently gained consider- 
able importance in connection with the development 
of international trade is the soy-bean. This product 
from Manchuria appeared for the first time in Euro- 
pean markets in 1908, but it became popular so 
rapidly that, in the following year, 440,000 tons of 
soy-beans were shipped thru the Suez Canal. The 
bean cake is of great value as cattle food, and the oil 
of the bean is used in the manufacture of soap. 

19. Cotton trade. — Next to the corn crop, the cot- 
ton crop is by far the most important product of 
the American soil. Cotton is a raw material which, 
altho it is produced in few regions, is used everywhere. 
Consequently, a great amount of cotton is transported 
from one part of the world to another. The United 
States is by far the most important producer of cotton 
in the world. Its output represents almost 60 per 
cent of the world's production. The following table 
shows the world's cotton production in the three years 
1912, 1913 and 1914 of those countries that produce 
more than 1,000,000 bales annually: 

Country Million bales at 478 pounds a bale net 




United States 




British India 








Asiatic Russia 




Almost all the most important cotton-consuming 


countries have tried to reduce their dependence upon 
American cotton. The British Cotton Growers' Asso- 
ciation, the Association Cottoniere Coloniale and other 
organizations were created for this very purpose. 
Russia, also, has made strenuous efforts to develop 
the cultivation of cotton within its boundaries. 

The largest consumer of cotton is the United 
States. Great Britain follows far behind. The dis- 
tribution of cotton consumption among different 
countries of the world is indicated by the following 
table : 


Season of 1914-15 


Bales of 
500 lbs. net 



United States 


United Kingdom. 


Other European Countries 








All others 


The fact that the United States produces over 60 
per cent of the world's cotton crop might lead some to 
think that this country is also the greatest exporter of 
cotton goods. This is not the case, altho it is true that 
our cotton spinning industry has grown rapidly. 
The number of spindles increased from less than four 
million in 1880, to 31.5 million in 1913, and the value 
of the product grew from $61,869,000, in 1860, to 
$628,392,000 in 1913. 








United States 



Cotton-growing states 



^11 othe 

r states 



United Kingdom 



German ^Empire 

























But the exportation of cotton goods grew slowly — 
more slowly than that of most of our manufactured 
exports. The latter increased 150 per cent in 
thirteen years, but cotton goods increased to only 125 
per cent. Even during the European war, we have 
been so busy manufacturing war supplies that we have 
neglected to develop our cotton goods exports. It is 
Great Britain that has absorbed most of Germany's 
suspended export trade in cotton goods. 

20. Tobacco trade. — Tobacco is of many varieties 
and gi'ows in almost every part of the world. It is 
the "money crop" of wide areas, such as Kentucky 
and Virginia, where the farmer depends upon the sale 
of tobacco for his profit, and raises other farm pro- 
ducts mainly for the purpose of sustaining himself and 
his family. The annual output of the United States 
passed a billion pounds in 1914. This figure repre- 
sented considerably more than one-third of the world's 


total production of 2,600,000,000 pounds at that time. 
India is the country next in importance. All other 
countries that raise any considerable quantities of 
tobacco, such as Russia and Austria-Hungary, fall 
far below the leaders as regards production. 

21. Iiiternational sugar trade. — Sugar is a com- 
modity which not only is of great importance in the 
life of a nation, but which also plays a significant part 
in international trade. There are two main sources 
from which it is obtained, the sugar beet and the sugar 
cane. These two sources have long been of practically 
equal importance, but of late it seems that cane is as- 
suming the greater significance. In 1913-1914 the 
world produced only 8,430,145,000 pounds of beet 
sugar as compared with 11,225,000,000 pounds of 
cane sugar. Sugar cane is found thruout the tropic 
world, where it serves as a staple food for the natives. 
Sugar-beet culture owes its existence largely to 
scientific research, which was first stimulated in this 
connection by Napoleon. He wished to become inde- 
pendent of the cane-sugar supply, controlled by Eng- 
land, which owned tropical colonies and controlled the 
seas. The process of extracting sugar from the sugar 
beet has been rapidly improved during the last cen- 
tury, especially in Germany, which is by far the most 
important producer of beet sugar. Russia and Aus- 
tria follow far behind, with only one-half of Ger- 
many's production. Altho the United States has 
given much attention to the development of its beet- 


sugar industry, the home crop is far from adequate 
to supply the demand that exists. 

The tables given below show, in pounds, the im- 
portation of sugar by the leading sugar-consuming 
countries, in 1913, the last peace year, and the exports 
for the same year of the chief sugar-producing coun- 
tries : 


United States 4,762,014,000 

United Kingdom 3,872,309,000 

British India 1,922,009,000 

China 948,230,000 

Japan 725,067,000 

Canada • 670,234,000 

Turkey 445,111,000 

Switzerland 258,513,000 

France 253,435,000 


Cuba .5,476,901,000 

Dutch East Indies 2,823,310,000 

Germany 2,462,020,000 

Austria-Hungary 2,368,765,000 

(No other country exported more than half a million 

22. Brussels Conventions.— The competition of the 
European sugar with tropical cane sugar caused no 
little embarrassment to England in the latter part 
of the last century. On the one hand, England 
wished to secure the cheapest sugar possible for its 
consumption and for its industrial use; on the other 


hand, it had to guard the interests of its colonies that 
produced cane sugar, especially Jamaica and Guiana. 
Government bounties stimulated the exportation of 
beet sugar from Germany, France, Russia, Austro- 
Hungaiy, Holland and Belgium. Moreover, Euro- 
pean refiners, protected in their home market by cus- 
toms tariffs, dumped their products abroad, and these 
competed so strongly with Colonial sugar on the Eng- 
lish market, and caused such a depression in the sugar- 
producing colonies, that England decided to interfere. 
Then, in order to forestall British retaliation, the 
various governments of the countries exporting beet 
sugar met with representatives of Great Britain at the 
so-called Brussels Conventions of 1901-02, which 
provided for abolition of the bounties, and placed the 
sugar trade of the world once more on a sound basis. 

23. Coffee. — By far the most important coffee- 
producing country is Brazil. Formerly Ceylon and 
other East Indian territories were among the best 
producers. The Ceylon plantations, however, suf- 
fered irretrievable loss from the damage done by the 
insect, "Hemleia Vastatrix," while the other produc- 
ing countries of the Pacific, such as Java, Sumatra 
and British India, are now falling behind because of 
soil-exhaustion. In the Brazilian state of Rio, also, 
the phenomenon of soil-exhaustion is beginning to 
manifest itself. On the other hand, Venezuela and 
Central America have prospects of greater coffee pro- 
duction in the near future. 

Within Brazil itself a gradual shifting of the center 


of coffee production from the state of Rio to that 
of Santos is taking place. 

Coffee is imported into Europe largely thru the 
four great ports of London, Hamburg, Antwerp and 
Havre. The Continental ports concentrate their 
coffee trade in their speculative markets. 

The history of the coffee trade, better than that of 
any other commodity, illustrates the effect of bumper 
crops upon the market price, and the methods by 
which the evils of this effect can be eliminated. In 
1906, the coffee production of Brazil was so large that 
the price fell rapidly. To stop this depreciation of 
the nation's wealth, the representatives of the coffee- 
producing states of Sao Paolo, Rio de Janeiro and 
Minas Geraes formed a "Convenium" which, with the 
aid of the Federal government, carried out the so- 
called "valorization" of Brazil coffee. The method 
was simple; seven and one half million sacks out of 
a total of twenty million (1,200,000 tons) were bought 
up by the state government with $15,000,000 bor- 
rowed from European bankers. The loan was paid 
back, interest and capital, with the proceeds of a heavy 
export tax and a sale of the seven and a half million 
sacks of coffee bought by the "Convenium." The 
export duties, togetlier with the withdrawal of over 
one-third of the crop from the market, effectually 
restored the price of Brazilian coffee in the world's 
markets. Thus, in Hamburg the price of "good av- 
erage Santos" rose from 8^ a pound, in 1907, to 13.9f 
in 1911. 



24. Rubber. — The industrial use of rubber besan 
largely with Goodyear's invention of the vulcanizing 
process in 1842. In this process, the application of 
sulphur makes rubber weather-proof. Today, great 
industries are dependent upon this raw material, 
which is used in everyday life in such forms as rubber- 
shoes, waterproof clothing, automobile tires and 
electric insulation. 

According to statistics published by the Raw Pro- 
ducts Company of New York the world's production 
of rubber for the years 1900 to 1916 inclusive has been 
as follows: 















































+ 1.7% 


— 4.5 ;? 
-h 6.8<^ 



+ n.o^ 

+ .004^ 
-+- 6.5^ 




— 5.2^ 

~h 6A% 1 




'-t- 1.2^, 


M- 6.5^ 


4- 31.6^ 
-t- 9.0^ 



H- 11.0^' 


+ S2.8^ 

1916 (est.) 

-+- 21.2% 

This table shows in a startling way the increase in 
the production of plantation rubber, which is in 
marked contrast to the stationary condition of the 
Brazilian output and to the rapid decrease in the pro- 
duction of African rubber. These figures permit the 
conclusion that wild Para (i.e., Brazil) rubber from 


the Amazon regions and Congo rubber will be largely 
replaced by the product of plantations in the Far 
East. English and German capital has been invested 
heavily in rubber plantations in the African Colonies, 
but especially in the East Indian Islands, the Malay 
Peninsula, Ceylon and certain parts of British India. 
Japan, also, is eager to have a share of this crop. The 
output of natural rubber has been declining as the 
native rubber-hunters, inspired by a greed for im- 
mediate profits, and with no regard for the future, 
continue to "bleed" the rubber trees to death. 

The replacing of tree-rubber by a synthetic equiva- 
lent is by no means outside of the range of possibility. 
The necessary process has been invented, but it has 
not yet proved commercially profitable. Further- 
more, the development of plantation rubber has 
favorably affected the price level of all grades of 
rubber, in the face of an unparalleled increase in the 
demand, and has thereby lessened the necessity of 
finding an artificial substitute for the natural product. 


In what sense may world-wide trade be considered a mod- 
ern phenomenon? 

Explain how foreign trade rests upon differences of natural re- 
sources, and different stages of economic development. 

Explain the statement that future trade will follow longitude 
rather than latitude. What reasons are given for the prediction ? 

What is the significance of the coal trade for Great Britain? 

Describe the wheat trade and recent developments in it. What 
other cereals enter into world trade? 

Give an account of the sugar trade and the competition of 
cane and beet sugar. 

Describe the trade movements in cotton, tobacco and rubber. 



1. Intimate relation of government and foreign 
trade. — In the beginning of modern times foreign 
trade was the object of soHcitous interest on the part 
of the government. As a factor in national affairs, 
foreign trade loomed far larger than it does today. 
For a century or more before the time of Adam Smith 
the chief object of the commercial policies of nations 
was to secure a favorable balance of trade and pro- 
mote the importation of gold. A whole school of 
political philosophy which dominated the government 
action in this period held up foreign trade as the pri- 
mary source of the growth of national wealth. 

2. Revenues. — Another reason for the extraordi- 
nary emphasis placed upon foreign trade was the 
intimate association between the exported and im- 
ported goods and the revenues of the state. Customs 
duties on imports, and often on exports formed the 
chief source of public revenues. The imposition of 
taxes always brings with it the intervention of the 
government authorities in business affairs. Hence, no 
other branch of economic activity was so early or so 
uniformly subjected to the scrutiny and supervision 
of the public authorities. 

Long after the idea was discarded that foreign 



trade was the sole source of national wealth the fact 
remained that it was, if not the sole source, at least 
the most prominent source of public income. Hence 
governments thruout the world continued to watch 
carefully the import and export movement, and on no 
other branch of business is our information so com- 
plete as here. 

3. Shipping. — On account of this interest in for- 
eign trade governments everywhere exercise special 
supervision over shipping. In the United States ship- 
ping is regulated by the Federal government thru 
the Bureau of Navigation in the Department of Com- 
merce. The Commissioner of Navigation is given 
plenary jurisdiction over the commercial, marine and 
merchant seamen of the United States so far as they 
are not subject under the laws to any other authority. 
His duties include: 

the registering, enrolling and licensing of American ves- 
sels, the measurement of vessels, the Interpretation of the 
tonnage tax laws, the listing and describing of all American 
vessels, the Issuance of Instructions to the collectors of cus- 
toms In regard to the documenting of vessels, and their clear- 
ance, entry, and movements, and Instructions In regard to 
the entry of vessels Into ports subject to quarantine, the 
enforcement of the law for the protection of seamen, and the 
publication of statistics relating to the merchant marine and 
the American shipping Industry. 

Thru other agencies the Federal government main- 
tains lighthouses, charts navigable waters, lends as- 
sistance to vessels in distress, and patrols the coast to 
succor the ship-wrecked. 

XV— 6 


Quite as far-reaching are the services rendered to 
shipping by analogous government bodies in Canada 
and other countries. 

4. Trade information. — One of the chief aids which 
governments give to those interested in foreign trade 
is the publication of general information on trade con- 
ditions. In the United States this work is centered in 
the Bureau of Foreign and Domestic Commerce of 
the Department of Commerce. 

Publications of this character relate either to trade 
opportunities or the statistical records of trade. The 
work of the Bureau of Foreign and Domestic Com- 
merce in bringing trade opportunities to the attention 
of the business men of the United States is considered 
in some detail in the Modern Business Text on "Busi- 
ness and the Government." 

Statistics of foreign trade are published monthly 
by the Bureau in pamphlet form. Annual figures 
with greater detail are published in a large volume on 
Commerce and Navigation of the United States. 

It may be added that corresponding commercial 
statistics, monthly and annual, are published by prac- 
tically all countries which have any considerable for- 
eign trade. 

The material thus published is usually made avail- 
able for business men gratis or at a nominal price. 
They constitute much more than a record of govern- 
ment activities, for they bring to the business man a 
wider outlook on aiFairs, and the relations between 
foreign trade and domestic production. To the ex- 


porter or to the manufacturer who produces for ex- 
port they are invaluable. Much of the information 
they contain is summarized in the daily press and in 
trade papers, but there come situations in business 
which require an exact knowledge of the facts obtain- 
able only from the original sources. 

5. Difficulty of obtaining Americans for positions 
abroad. — The unwillingness of the American citizen 
to face permanent or even long expatriation, goes far 
toward explaining why it is difficult to obtain Ameri- 
cans to fill posts abroad. And even those that accept 
such positions seldom wish to retain them for a period 
of more than three years. The novelty of the new 
land wears off, and the ties that bind the American to 
home and friends are, generally speaking, stronger 
than those that can be knit abroad. Home opportu- 
nities for lucrative employment and rapid advance- 
ment are so great that young Americans endowed 
with the basic qualities of resourcefulness and initia- 
tive hesitate to enter the foreign field. 

On this account American firms have been com- 
pelled to employ many foreigners in their export 
branches or export departments. The disadvantage 
involved is considerable. Foreign employes often 
make ideal clerks and correspondents, but frequently 
lack the resourcefulness and initiative that are neces- 
sary in higher posts. The desirability of employing 
Americans in foreign trade fields will become greater 
as the international rivalry in the markets of the world 


6. Training needed. — Mr. James J. Farrell, Pres- 
ident of the United States Steel Corporation, has 
given the following statement of the chief requisite 
for a successful career in foreign trade :^ 

1. A well grounded knowledge of the English language, 
to permit clear and concise expression. A knowledge of one 
or more languages in addition to English. 

2. A comprehensive knowledge of the fundamental rules of 
arithmetic, including percentage, merchandise and currency 
calculations, and short methods of accurate computation. 

3. A practical knowledge of business-office routine, includ- 
ing the proper handling of mail, receipt and preparation of 
orders, invoicing and accounting. 

4. A practical working knowledge of the routine of the 
manufacture of any given line of products, including the 
elements of cost of production. If this can be arranged by 
actual experience in manufacture, the results are likely to 
be of greater benefit than the superficial, limited inspection 
of manufacturing processes frequently used as the basis of a 
salesman's equipment. 

5. Sufficient acquaintance with commercial law and prac- 
tice, particularly with respect to the negotiation of ordinary 
business contracts, to enable determination of ordinary ques- 
tions relating to business without frequent recourse to legal 

6. A knowledge of domestic and foreign markets, based 
upon a careful study of natural and manufactured products, 
and their application to the commerce of nations. 

7. Systematic study of the ocean-borne transportation of 
the world, to attain a degree of familiarity with the types 
of steamers suitable for the various cargoes adapted to re- 
spective trades, the loading of such steamers, the relation 
of freight rates to measurement and weight cargo and to 
the class of cargo, a general knowledge of the fundamentals 

ij. J. Farrell, on "Educational Requirements," Proceedings of the 
Third National Foreign Trade Convention, p. 173. 


of chartering, ocean bills of lading, marine and war-risk 
insurance, and similar subjects identified with ocean trans- 
portation. If the products to be sold come into competi- 
tion with home manufactures or with materials on which 
there are discriminatory duties in favor of other nations, 
the study of the customs tariffs would ultimately be essen- 

7. Training available. — To meet the growing re- 
quirements of our expanding foreign trade, various 
organizations and institutions are establishing new 
branches and arranging for new courses. There is a 
continually growing number of special courses oiFered 
by schools, colleges and universities, by Y. M. C. A.'s 
and other semi-philanthropic organizations and by 
business houses. These courses, which cover a wide 
range, include economics, modern languages, indus- 
trial organization, commercial geography, finance, 
banking, transportation, tariffs, business manage- 
ment, accounting and statistics. The aim of such edu- 
cational work should be to give a man a solid founda- 
tion in the elements of business life which will enable 
him to specialize successfully in any particular field he 
may enter. 

Our large corporations fully realize the importance 
of thoro training for activity in foreign trade, as well 
as the necessity for a general education. Many be- 
lieve that in the proper education of our young men 
in business, lies the only guarantee of the future wel- 
fare of this country. Mr. W. S. Kies, Vice-President 
of the National City Bank, holds that upon the abil- 
ity of this country to develop in the next few years 


the type of young man who can succeed in foreign 
countries, will depend the future of the country as a 
commercial nation. This bank has an unusually large 
and flourishing school for the training not only of men 
for its rapidly multiplying foreign branches, but of 
home employes who might profit from a familiarity 
with foreign trade. 

8. Canada's efforts. — It is unfortunately true that 
practically no special steps are being taken in Canada 
to give men interested in foreign trade a thoro train- 
ing in the technic of the subject or a knowledge of the 
commercial languages spoken in the various export 
fields. In the universities, of course, instruction is 
given in economics, commercial geography, the theory 
of international trade, tariff's, banking and finance, 
transportation, accounting and statistics, and the 
modern languages. 

Much needs to be done by Canada to provide the 
training which is going to be so essential in the com- 
ing period of trade expansion. Manufacturers who 
are now establishing or proposing to establish export 
departments find it very difficult, if not impossible, to 
find men with the necessary qualifications to handle 
the export work. Other business men — men with 
considerable experience in foreign trade — make the 
complaint that except at the head offices or in impor- 
tant shipping centers there are very few men con- 
nected with the banks who are well informed in regard 
to the needs and the technic of export business. 


9. General work of the Philadelphia Commercial 
Museum. — A case of a public institution that devotes 
considerable effort to imparting a general knowledge 
of commerce is furnished by the Philadelphia Com- 
mercial Museum, supported by the city of Philadel- 
phia and the state of Pennsylvania. Its object is ac- 
complished largely thru exhibits, miniature museums 
and lectures. The exhibits installed in the main build- 
ing of the Museum represent the commercial mate- 
rials of the world, and the imports and exports as well 
as the manners and customs of foreign countries. The 
main purpose of these exhibits is to give a vivid idea 
of the chief characteristics of foreign peoples, and of 
the products of their countries. More than two thou- 
sand miniature museums, that show commercial prod- 
ucts, photographs, and maps, have been distributed 
among the schools of Pennsylvania. A system has 
also been developed whereby daily illustrated lectures 
are delivered to the schools by members of a regular 
staff. These talks are given in the lecture hall of the 
Museum. Free, illustrated public lectures on topics 
pertaining to commerce and travel are also given 
weekly during a large part of the year. The work of 
the Export Department of this institution will be 
taken up below. 

An interesting course on foreign trade is being 
given by the Export Bureau of the Philadelphia 
Chamber of Commerce in collaboration with the Edu- 
cational Bureau of the Y. M. C. A. Besides a course 
in foreign languages and more elementary subjects 


that have a bearing on foreign trade, a special course 
on exports is given which touches upon eveiy phase 
of export shipping, export selling, international credit 
and settlement, and trade conditions in selected ex- 
port markets. 

10. Private organs of information. — Not only does 
foreign trade bring profit to those immediately en- 
gaged in its pursuit, but its advantages extend indi- 
rectly to such concerns as railroads, banks, express 
companies and trade papers. Since the increase in 
their profits is in direct proportion to that of the for- 
eign trade itself, these enterprises are naturally inter- 
ested in its development and are therefore interested 
in lending their aid to individuals. 

There are two classes of institutions engaged in the 
work of disseminating information concerning foreign 
trade. First, there are those corporations which 
incidentally spread information concerning foreign 
trade possibilities and foreign credit conditions, be- 
sides carrying on their regular work — banking or 
transportation, for instance. Secondly, there are 
those businesses and institutions which devote them- 
selves entirely to this kind of work, either for the sake 
of private gain or else in the interest of the public 

11. Important service of express companies. — A 
good example is the work in connection with foreign- 
trade service rendered by one of the great express 
companies. This company has organized a foreign- 
trade information bureau as a part of its foreign de- 


partment. Its activities are twofold. It dissemi- 
nates reliable information on foreign markets and 
renders practical assistance in the introduction of 
American goods and in the securing of proper con- 
nections in foreign fields. Thru its direct connection 
with the numerous foreign offices of the company, the 
foreign-trade information bureau is in a position to 
act as a clearing-house of valuable information which 
might not be secured from any other source. It is 
in a position also to report on the following subjects: 
currency and exchange conditions, weights and meas- 
ures, steamship lines and routes, postal regulations, 
foreign competition, introductory and selling meth- 
ods, trade conditions, general credit terms, catalogs 
and trade literature requirements; the course, time 
and frequency of shipping routes, the consular invoice 
regulations, marine insurance, special packing, meth- 
ods of financing foreign shipments, collections, and 
patent and trade-mark laws. And not only is infor- 
mation given on all these various subjects, but actual 
assistance is rendered in connection with all the prin- 
cipal problems of foreign trade. 

12. Banks as sources of promotion. — The great 
banks, also, that interest themselves specifically in the 
promotion of foreign trade, have an extensive infor- 
mation service. Thru a publicity bureau general in- 
formation is given out in special pamphlets and let- 
ters, sent out at regular intervals, which discuss, from 
the standpoint of general business, the economic con- 
ditions of those markets in whose development the 


bank is particularly interested. For example, the 
Guaranty Trust Company of New York issues book- 
lets on Cuba, Argentine, Russia and China. The 
same institution has also pubHshed a book entitled 
"How Business with Foreign Countries is Financed," 
which is largely a compilation of the various docu- 
ments used in foreign trade and shipping, such as bills 
of lading, marine insurance certificates, commercial 
drafts, consular invoices, commercial letters of credit, 
bank acceptances and trust receipts. The National 
City Bank publishes pamphlets of a similar nature; 
for example, the following: "Acceptances," "Federal 
Reserve and National Bank Acts," "Active Regula- 
tions and Circulars of the Federal Resei-i^e Board," 
"Foreign Commerce in American Textiles," "Branch 
Banks and Foreign Trade." In addition, the National 
City Bank publishes a monthly magazine entitled 
"The Americas f which contains a wealth of informa- 
ton pertaining to conditions in foreign markets, for- 
eign trade methods, foreign banking and aUied sub- 
jects. The First National Bank of Boston whose 
Foreign Department has extensive connections, pub- 
lishes monthly a valuable "Foreign Trade Letter." ^ 

1 The Canadian banks do not go so far as to issue special pamphlets 
or regular letters as is done by the United States banks. The more pro- 
gressive banks do however give similar information to their own clients 
in a less formal and public way. For instance an advertisement of the 
Canadian Bank of Commerce reads as follows: "Extension of Canadian 
trade. The bank will make inquiries into the possibilities and require- 
ments of markets abroad for exporters or importers who desire to extend 
their trade with British colonies or possessions. Owing to the large num- 
ber of its correspondents and agents it has unusual facilities for this 


Another phase of this interest of the banks is the 
fostering of concerns devoted to foreign trade. Thus 
the American International Corporation with a cap- 
ital of $50,000,000 was launched by a group of bank- 
ing interests led by the National City Bank of New 

13. Foreign trade department of the Philadelphia 
Commercial Museum. — Another important source of 
information regarding foreign trade is the Foreign 
Trade Department of the Philadelphia Commercial 
Museum. Long before there was a Bureau of For- 
eign and Domestic Commerce in Washington, this 
institution, financed by the city of Philadelphia and 
the state of Pennsylvania, was conducting work very 
similar to that now done by the Government's Bureau. 
Members of the staff of the Philadelphia Museum 
have been sent to almost every part of the world to 
establish connections with business organizations, gov- 
ernmental bureaus, banking institutions, bureaus of 
general information, and private concerns. Thru 
these connections the Philadelphia institution con- 
stantly receives fresh data bearing on the trade and 
commerce of foreign countries, including a large 
amount of information concerning trade opportuni- 

The large staff of the Foreign Trade Bureau — 
which consists of a great number of well-trained men 
— answers hundreds of inquiries every day, relating 
to practically every phase of the export trade. It also 
acts as an adviser to not a few foreign firms that ap- 


peal to the Museum for assistance in establishing busi- 
ness relations in the United States. It has corre- 
spondents in almost every city of any commercial im- 
portance in the world, and it is in constant communi- 
cation with several hundred trade organizations 
abroad with which it has made an arrangement for 
reciprocal service. An exceptionally large library 
makes it possible for the staff of the Bureau, as well 
as other readers, to secure easily any printed infor- 
mation concerning important subjects. 

The Foreign Trade Bureau publishes two periodi- 
cals, one of which, "Commercial America f^ is issued 
in both English and Spanish. It circulates widely 
among importing houses in all parts of the world. 
The other, the "Weekly Export Bulletin'' is de- 
signed principally for distribution among manufac- 
turers in this country who are interested in foreign 

One of the features of the work of the Bureau is the 
collection of credit information. In this field it ren- 
ders services similar to those of the great mercantile 
agencies, R. G. Dun and Company and the Brad- 
street Company, which were established in 1841 and 
1849 respectively. Few people realize what an im- 
measurable superiority of method the books of ratings 
published by these companies afford to the American 
merchant, compared to that available in foreign coun- 
tries. As the granting of impersonal mercantile credit 
came to be in vogue in foreign as well as in domestic 
business, these companies branched out into foreign 


countries. The Bradstreet Company has today 116 
offices outside of the United States, which are oper- 
ated either by the company itself or by Bradstreet in 
conjunction with other concerns. R. G. Dun and 
Company are represented in foreign countries by 93 
branch offices. Thru the widely ramified organiza- 
tions of these two firms, the miller upon the remote 
banks of the Don and the merchant trader on the 
Amazon can both be brought into touch with the 
American who seeks commercial relations with them. 

14. The National Foreign Trade Council. — The 
publications of the National Foreign Trade Council 
constitute a valuable source of information on matters 
pertaining to the development of foreign trade. So 
far, four large volumes have been published, which 
contain the records of the national Foreign Trade 
Conventions called by the Council. Besides these, 
there are several monographs that deal with the ac- 
tivities in the special fields of foreign trade. The 
report of the International Trade Conference held 
under the auspices of the National Association of 
Manufacturers, December, 1915, is also a valuable 
contribution to the literature on foreign trade. ^ 

15. Trade papers. — Some of the trade papers hare 
established such valuable connections with foreign 
countries that their aid has become indispensable to 
many concerns. In some cases other service is ren- 
dered besides the dissemination of information thru 

1 The Canadian Manufacturers' Association fulfills, among other func- 
tions, many of those intrusted to the Council. 


timely articles, editorials and advertising matter. For 
example, letters written in foreign languages, and se- 
cured as a result of advertising, are translated free 
of charge, and lists of the names of selected buyers in 
any trade and in any market, as well as the financial 
ratings of foreign firms who apply for credit, are sup- 
plied to any who may wish them. Moreover, expert 
assistance is given to those who wish to solve any spe- 
cial problems that arise in connection with the estab- 
lishment of new trade connections in foreign coun- 

Some of the Canadian trade papers, while not going 
so far as those in the United States, also do a good 
deal to assist foreign trade by publishing special arti- 
cles, opportune editorials and advertising matter. 
Most of them indeed have a special section devoted 
solely to foreign markets and the Canadian export 

16. Branch banks. — The Federal Reserve Act has 
to some extent emancipated the foreign trade of the 
United States from the control of foreign bankers by 
permitting National banks to establish branches in 
foreign countries. Before this act existed, branch 
banking was practically an impossibility for Amer- t 
ican banks. With few exceptions, the states do not * 
grant to banks operating under a state charter the 
right of establishing, branches. When this right is 
granted by the state, it usually is restricted to apply 
only in the city in which the bank is located. Trust 
companies were formerly the only banking institu- 


tions which, as a class, according to the laws of most 
states, could establish branch banks in foreign coun- 
tries. An exception to this rule was the granting of a 
special charter in 1901 by the state of Connecticut to 
the International Banking Corporation, w^hich was 
thereby empowered to establish branches in any part 
of the world. This charter, however, is unique; no 
other banking institution possesses one approaching 
it in scope. 

Forty British banks operating in foreign countries 
have 1,325 branches, and in South America alone, 
five German banks have forty branches. Thru their 
branch banks the great commercial nations of Europe 
have exercised a powerful control over the trade rela- 
tions of these oversea countries. Largely by means of 
this banking control Great Britain, Germany and 
France exacted heavy tribute in all transactions with 
the countries in which their influence was so strongly 
felt. American goods imported into South America, 
for instance, were in many cases sent by way of Eng- 
land, and even when they were exported directly they 
were paid for by drafts on London or some other 
European international financing center. Even goods 
imported into this country were formerly paid for — 
and many of them are still paid for — thru foreign 

The relief that the Federal Reserve Act brought 
was almost immediate. One result has been the estab- 
lishment of numerous branches of the National City 
Bank of New York in foreign countries. In order to 


furnish facilities in the Orient, the National City 
Bank has acquired the International Banking Cor- 
poration with its sixteen branches in India, China, 
Japan and the Philippines. These branches are be- 
ing operated independently but in the closest harmony 
with the branches of the City Bank. Each branch is 
provided with a trade department and a special credit 
department which are the means of making the branch 
banks powerful promoters of American commerce. 
It is said that twice the present number of branch 
banks would have been opened if it had been possible 
to equip them with staffs composed of capable Amer- 
icans. To provide such staffs is essential in order to 
overcome local prejudices and win the good- will of 
the foreign countries for the American banker. 

17. Dollar exchange. — Perhaps the greatest single 
service rendered by these branch banks is the building 
up of a market for dollar exchange. Mr. W. S. Kies 
of the National City Bank refers in the following 
words to the urgent need for this service : 

Before the establishment of branches in Brazil, Argentina 
and Uruguay, the dollar was not even quoted. During the 
last year the volume of direct exchange between these coun- 
tries and the United States has been remarkable, and prac- 
tically all the shipments of wool, hides, quebracho, and a 
large portion of the coffee, have been financed thru the 
medium of dollar credits. 

England's pre-eminence as the world's financial 
market is, to a large extent, due to the services per- 
formed by the English acceptance houses, and to the 


existence of an active discount market for bills on 
London originating in all parts of the world. The 
introduction of the trade acceptance into American 
banking brought about by the provision in Sec. 84 
of the Federal Reserve Act, has effected a great im- 
provement in the methods by which foreign trade may 
be financed. It cannot be expected that the American 
bill drawn in dollars will wholly take the place of the 
London bill, but considering the establishment of 
branch banks — many of them in strategic markets of 
the world — and the combination of circumstances now 
favoring this country, it can confidently be expected 
that the bill on New York will soon become a recog- 
nized medium for settling balances in international 

18. Foreign investments. — One of the features that 
account for the great value of branch banks in inter- 
national commerce is the assistance which they render 
in connection with international investments. The 
idea that trade follows the flag has of late been largely 
superseded by the realization that "trade follows for- 
eign investment." The countries that have contrib- 
uted capital for the development of other countries 
have reaped from the financial relationship involved, 
great commercial advantages. When a nation invests 
systematically and to a great extent in foreign coun- 
tries the entire capital invariably goes out in the form 
of machinery, materials for construction, tools and 
general supplies for the construction forces. And 
when the foreign enterprises have been thus brought 

XV — 7 


to life, they continue to buy supplies for maintenance 
repairs and renewals. Even loans to foreign govern- 
ments and municipalities are of very great importance 
in the building up of foreign commerce. England, 
Germany and France have put into Argentine, Bra- 
zil and Uruguay in the last twenty-five years approxi- 
mately $4,000,000,000 and, as a result, enjoy together 
46 per cent of the total trade of these three countries. 
At the outbreak of the great European war it was 
intimated that British investments in foreign coun- 
tries amounted to not less than $20,000,000,000. Of 
this amount, $9,240,000,000 was invested in British 
colonies, dominions and possessions, and $3,160,000,- 
000 in the United States. Consequently, if that esti- 
mate was correct, $7,600,000,000 was invested in other 
parts of the world. In a pamphlet issued by the Na- 
tional City Bank of New York the statement is made : 
"Of the annual return on this vast amount, the cred- 
itor nation has never taken all, but has left a sum 
ranging between $600,000,000 and $800,000,000 for 

19. Foreign branches of Canadian hanks. — Fortu- 
nately the Canadian Bank Act permits the chartered 
banks to open branches outside of Canada, and sev- 
eral of the leading banks have established branches or 
agencies in London, Paris, New York and other 
points in the United States, Newfoundland, the West 
Indies and Mexico. Those in London and New York 
were established chiefly because of the necessity of 
maintaining adequate reserves outside of Canada and 


the facilities afforded in these financial centers for 
international exchange operations. In regard to the 
others, however, the policy seems to have been gov- 
erned not so much by a desire to compete for local 
trade, as by the exigencies of the banks' own or their 
customers' business. 

The question is sometimes asked whether, apart 
from a few such instances, Canadian banks have done 
all that was possible to build up foreign trade. Com- 
plaints are not frequent but they have occasionally 
been made. To quote a man prominently connected 
with the export business: — "There has been little or 
no concerted action in the past to organize the export 
fields, with the result that Canadian banks have pro- 
vided little or no special machinery for this class of 
business, and are not particularly well-informed with 
regard to the necessity of their cooperation in export 
business, except at their head offices or in important 
shipping centers." The Canadian Trade Commis- 
sioner in the Argentine Republic has frequently 
pointed out that before a large trade can be built up 
with that market better shipping and banking facili- 
ties must be provided. 

20. Canada s foreign investments. — While the 
shrewdest of Canada's business and financial men may 
have long since realized the truth in the maxim that 
trade follows the loan, yet as a matter of practical 
policy any large recourse to this method of cultivating 
trade has been impossible. True it is that Canadians 
played a unique part in the exploitation of the light 



and power traction opportunities of Latin America^ 
especially Brazil, Mexico and the West Indies, bul 
the credit is due to Canadian enterprise working 
largely with foreign capital. Canadian railroads, 
again, have built, bought and leased over 7,000 miles 
of road in the United States or nearly one-quarter the 
extent of the whole Canadian railway system. But 
as has already been shown, Canada, "with half a con- i( 
tinent held in trust, its resources little known and less 
developed," must for many a year remain a seeker of 

21. Railroads and foreign trade. — Finally, the 
transportation companies are in a position to aid very 
considerably the development of foreign trade. 
Edward N. Hurley, formerly of the Federal Trade 
Commission, may have attached exaggerated impor- 
tance to the part that railroads can play in this respect 
when he stated that the establishment, by the railroads, 
of foreign trade departments would mean the virtual 
prevention of panics and periods of business depres- 
sions. There is no doubt, however, that they can do ^ 
much. fl 


What is the historical reason for the governments of the world 
giving especial attention to the foreign trade and shipping? 

Describe the general nature of the information regarding for- 
eign trade which governments make available. 

Explain the need of special training for work in foreign trade. 

Describe the educational work of the National City Bank, and 
the Philadelphia Commercial Museum, 

What kinds of corporations and business concerns are inter- 


ested in disseminating information upon foreign trade, and what 
means do they employ? 

How do branch banks promote foreign trade? 

What is meant by dollar exchange? What is the outlook for 
its wider use? 

Explain how investments in foreign countries promote foreign 



1. Variety of foreign-trade methods. — The foreign 
trade of a country is the composite of thousands of 
individual transactions, varying widely as regards 
the methods by which they are performed. The size 
of the exporting firm, the volume of its business, the 
nature of the goods exported, general economic con- 
ditions and trade traditions in the exporting and 
importing countries, the customs regulations at the 
ports of clearance and entry — these are among the 
most important factors that have to do with the 
manner in which foreign trade is carried on. The 
export manager of a large American corporation 
expresses the following opinion in regard to foreign- 
trade methods: 

There is one thing which it seems to me should be more 
impressed upon the minds of manufacturers who are think- 
ing for the first time of going into foreign markets. It is the 
fact that they cannot sell all kinds of things in the foreign 
markets, or in small or large quantities, in the same way. 
Every man who is going into the export field has a problem 
in the organization of his foreign sales that is particularly 
his own, and he had better study it out before he goes too 
far in other directions. We do not handle our business with 
the same kind of selling organizations everywhere. There 
are parts of the world where we have our own representatives, 
acting singly, in other parts, a more formal organization of 



salesmen under local managers. In some countries, however, 
we have found it best to sell thru local agents or commission 
houses, or thru large wholesalers with whom we make special 
arrangements. Part of our export business is handled for 
us by international trading companies. 

2. Direct and indirect methods. — There are two 
methods of dealing with foreign customers, the direct 
and the indirect. To understand what is meant by 
the terms "direct" and "indirect," it is necessary to 
keep clearly in mind what part of the exporting proc- 
ess is meant. Exporting, like all other merchandis- 
ing, is divided into three main groups of activity; 
marketing (including advertising, corresponding and 
selling), financing and shipping. We refer here ex- 
clusively to the first group, marketing. When the 
direct method of exporting is used, the foreign cus- 
tomers are reached directly thru the manufacturer's 
own export department, and no use is made of the 
services of an intermediary outside the manufacturer's 
organization. For his financing, the manufacturer 
may need the supj)ort of a banker, and he may avail 
himself of the services of a forwarding agent in the 
actual shipping of his goods, but the marketing is done 
by the manufacturer himself. 

On the page following is a diagram illustrating di- 
rect and indirect methods of exporting. As this chart 
shows, there are several methods of direct exporting. 
The manufacturer can reach his customer thru branch 
offices, thru salesmen or thru advertising and corre- 






3. Export department. — In all cases the manu- 
facturer who enters the export field will have a special 
export department. Our giant corporations have 
found it desirable to organize subsidiary companies to 
handle all their foreign business. Examples are The 
United States Steel Products Company, the foreign 
sales subsidiary of the United States Steel Corpora- 
tion ; Bethlehem Steel Products Company, the export 
subsidiary of the Bethlehem Steel Company, and the 
United States Rubber Export Company, which is the 
corresponding subsidiary of the United States Rubber 
Company. Naturally, only a great corporation which 
is itself composed of individual companies can afford 
to carry the overhead expenses of such an organiza- 

The manufacturer's exporting department may be 
only loosely connected with the home organization, 
and may have an independent export manager, who is 
sometimes responsible to the directors alone; or else 
it may be "built in" — that is, organized in such a way 
that the existing office and clerical forces are used as 
much as possible for both domestic and foreign busi- 

4. Marketing policy. — When the form of organiza- 
tion for the export department has been decided upon, 
the next question concerns the marketing policy. In 
the case of a worldwide selling campaign, it is quite 
possible that every available method must be used, 
since different markets require different treatment. 
Some parts of the world can be reached only thru 


certain trading companies, others must be exploited 
thru branch houses, and still others by mail. Since 
there are very many varieties of marketing methods 
that are practicable, each case must receive careful 
consideration with respect to what method it will be 
best to use. In any event, practically the same prin- 
ciples that have proved successful in domestic trade 
can be applied. However, a few suggestions will 
prove useful for guidance. 

5. Branch houses. — The establishment of branch 
houses is an undertaking which involves a large out- 
lay of capital, causes heavy overhead expense, and 
pays only in the case of long-term sales campaigns. 
It is therefore by all means desirable to consider most 
seriously all the factors involved before deciding to 
establish branch houses. A number of our pioneer 
export corporations, however, such as the Singer Sew- 
ing Machine Company, the Walkover Shoe Company, 
the International Harvester Company, the United 
States Steel Products Company, the Victor Phono- 
graph Company, have employed the branch-house 
method with great success. Besides large capital 
backing, a prerequisite of this method is a firm de- 
termination to go into the foreign business of today 
with the idea of permanency, and not merely for the 
purpose of taking the foreign market by storm in some 
hasty whirlwind campaign. 

6. Salesmen abroad. — A book could be written on 
the subject of the employment of American salesmen 
abroad. The problem is complicated by the fact that 



an economic, a national and a psychological viewpoint 
are essential. The greatest possible care must be 
taken in routing the salesmen in foreign fields, for the 
distances to be covered are so gi'eat that faulty routing 
may result in greater losses than in the case of domes- 
tic selling. Moreover, greater patience is required 
than in selling at home, for it is often a long time be- 
fore results are perceptible. And finally, in selecting 
the salesmen the concern must bear clearly in mind the 
conditions peculiar to the market that these men are to 

7. Local commission agents. — The local commis- 
sion agent differs from the salesman in two essential 
points. The first is, that he is permanently stationed 
in a given territorj^ and the second that, being a 
representative of a number of concerns, he stands out- 
side the organization of the exporting manufacturer. 
Because of this latter fact, we cannot accurately say 
that the exporting is done directly when such a man 
is employed. The local commission agent is con- 
sidered at this point in order that we may compare 
him with an exporting concern's agent who travels 
abroad. The local commission agent who lives abroad 
has a marked advantage in that he possesses a more 
thoro knowledge of trade and financial conditions than 
the traveling salesman can secure from occasional 
visits. The limitation of the local man's territory 
enables him to become intimately acquainted with a 
wide range of commodities and buyers. As a rule, 
each of these agents is granted exclusive rights in his 


own territory. In such countries as Australia, South 
Africa and China, where American export commis- 
sion houses have an extremely strong hold on the cus- 
tomers, the local commission agent confines his efforts 
to the securing of the order for the manufacturer 
whom he represents and handing it over to the com- 
mission house thru which his customer deals. The 
commission house then tends to the execution of the 
indent in its usual way. (The term, indent, is the 
technical name for a foreign order.) 

The local commission agent, because he is in 
intimate contact with local conditions, and because 
he is continually on the spot, can take advantage of 
seasonal changes and of special opportunities that may 
arise. He is granted the right to make the selling 
prices conform to special conditions and opportunities. 
Because he keeps in close touch with local bankers, 
collection attorneys, and credit-protection associa- 
tions, the local commission agent is well able to pass 
judgment in regard to the advisability of granting 
credit to those who apply for it. He can assist the col- 
lection department by personal requests for payment ; 
he can mediate in any disputes that take place 
between the firm and its customers; and he can be 
made the receiver of stock goods, especially spare 
and repair parts for mechanical apparatus. In rare 
cases this local agent assumes financial risk incident 
to a foreign sale by virtually guaranteeing a cus- 
tomer's account. Under such circumstances the law 
designates him as a "del credere" agent. 


The functions and duties of the local commission 
agent abroad differ from those of the foreign agent as 
they are frequently understood. The term, foreign 
agent, is often used to designate a foreign merchant 
who buys independently on his own account, and who 
has a more or less exclusive right in a given territory 
to handle the goods which he buys. For him, sales 
are, of course, direct sales. 

8. Forwarding agents. — Whether he sells directly 
or indirectly, the exporter, in order to facilitate 
shipment, must utilize the services of specialists in 
the shipping line. A manufacturer who is not over- 
anxious to develop his export trade, but who is occa- 
sionally approached concerning an order by a firm 
abroad, generally employs a forwarding agent to 
attend to the collection, dispatch and clearance thru 
the customs of such shipments. ^Moreover, the thru 
bills of lading that can be obtained from this country 
provide for the shipment of goods to foreign ports 
only. If the buyer is inland, abroad, he may desire 
to have the shipment delivered to him simply "f. o. b. 
destination." An American forwarding concern, 
such as one of our express companies, can give a thru 
bill of lading for any interior point in the world. In 
foreign countries that have highly developed forward- 
ing agencies of their own — England and Germany, 
for example — the interior buyer will prefer to have 
the goods delivered f . o. b. to the port and will attend 
personally to forwarding them inland. 

American forwarding concerns, like our express 


companies, handle a great volume of small shipments 
which all move in the same direction, but which 
originate with different manufacturers. The goods 
are packed together and combined on one ocean bill 
of lading. The forwarder's agent divides the ship- 
ment at the port of discharge for delivery to the 
various consignees. The fonvarding agent also 
attends to clearing the goods thru the customs of the 
importing countr}^ The forwarder thus makes possi- 
ble a saving in freight rates and the obtaining of a 
thru rate to the interior point of destination, and, in 
addition, gives valuable service in clearance at the 
port of export as well as at the port of discharge. 

9. Freight broker. — Services similar to those 
performed by the forwarding agent at the port of 
shipment are also performed bj'^ a freight broker at 
the American port. To him are consigned the export 
goods from the interior points where the orders 
originated. He pays the necessary^ dock charges, 
takes out an ocean bill of lading, clears the shipment 
and sees that it is put promptly on board the steamer 
for which it is booked. The freight broker is paid by 
the shipping companj^- for which he works a commis- 
sion on the amount of freight that he delivers for that 

10. Parcel post. — The parcel post renders valuable 
service in direct trading. It is especially adapted to 
the delivery of small trial orders, samples, repair parts 
and small articles urgently needed. It is particularly^ 
useful to a concern that deals with customers in the 


out-of-the-way corners of the world. In the matter 
of parcel post connections, the American exporter is 
seriously hampered in competing with his European 
commercial rivals. From England, Germany, Hol- 
land and Belgium, merchandise can be forwarded by 
post, c. o. d., to the most remote countries, at low 
cost to the buyer and with little risk to the seller. An 
American cannot send goods by mail c. o. d. to a 
single foreign country, or even to the Philippines. 
The American government has so far failed to furnish 
parcel post connection of any sort with Cuba, 
Roumania, Bulgaria, the greater part of India, Siam, 
the Malay States and the Straits Settlements of Asia. 
Likewise in Canada there are no arrangements under 
which parcels must be sent by mail c. o. d. to any 
place in Canada or in any other country. 

This condition is a serious handicap to the small 
exporter. The larger exporter sometimes solves the 
problem by consolidating a number of small parcel- 
post shipments into one single freight shipment, for- 
warding this to the foreign countries that have ade- 
quate parcel-post facilities, and having the parcel- 
post shipments unpacked and distributed there. The 
export manager of a large mercantile establishment 
in Chicago gives the following description of a method 
employed by his firm : 

By reason of the volume of our business we have been able 
to effect an arrangement whereby we forward to Liverpool 
three times a week a bale of packages already wrapped and 
addressed to places with which the United States has no 


parcel post connection. At Liverpool the mail is opened and 
the parcels are deposited in the British post by our agent. 
This arrangement gives us an advantage over casual ship- 
pers, who must rely upon the high charges and unsatisfactory 
service of forwarding concerns. 

It is certainly not right that British wares can be 
sent by the London competitors of American 
exporters to the Philippines, Hawaii and Alaska by 
post, but that American goods cannot be sent by mail 
to the islands under British control in the same part 
of the world. Our Pacific possessions are free to 
British merchants, but Great Britain's Pacific Islands 
are closed to us. The extension of our parcel post 
facilities is one of the most urgent tasks that our gov- 
ernment has to perform. 

11. Selling hy mail. — The salesmen's weapon is 
**the spoken word." His sales talk, which is built 
about a concrete fact, is a case in point. Salesmen 
are usually aided by the wi'itten word (corre- 
spondence) and the printed word (catalogs and 
advertising). In certain cases, particularly in the 
marketing of low-priced specialties, thruout the entire 
sales campaign these two instruments are used exclu- 
sively. In other words, no personal salesmen are 
employed. The term, "all-mail" campaign applies 
under such circumstances. 

12. Indirect exporting. — Even if the American 
exporter decides to turn over to others the task of 
pushing his sales abroad, he is by no means freed from 
the responsibility of strictly supervising the work that 


is done. No manufacturer or exporter can afford to 
rely absolutely upon the zeal and ability of those who 
are not directly and exclusively working for him. If 
anyone thinks that he can simply turn his export busi- 
ness over to professional exporters and draw profits 
from the efforts of others he is probably doomed to 

13. Position of the middleman. — In many cases the 
world-wide tendency toward the elimination of the 
middleman is carried too far. There is danger of 
swinging from one extreme to the other. It is as 
wrong to believe that the aid of others is always to 
be spurned, as it is to rely entirely upon it. The 
middleman, whether agent or merchant, is not 
"everything," yet he fills his place, a place which no 
one else can occupy without the smoothness and 
efficiency of the mechanism of foreign trade being 
diminished. The middleman is not a "parasite on the 
trade," not a "leech on the factory," his profit is not 
"a tribute akin to blackmail." The fundamental 
principles of economics, upon which are based the 
division of labor and the resulting specialization of 
occupations, justify the existence of various types of 
middlemen in the foreign trade, just as they warrant 
the division of the manufacturing process into 
manifold partial performances. When the manu- 
facturer has introduced his goods effectively in a 
foreign market, if he has large sales and a good capital 
backing, if by long experience and by the possession 
of a very capable export organization he is fitted to 

XV— 8 


deal with the difficulties connected with foreign 
shipping, he is wise if he eliminates all middlemen and 
adopts the method of direct trading. But such cases 
are rare exceptions. As a rule, the foreign market 
needs constant attention, and consequently, unless the 
conditions mentioned above prevail, the manufacturer 
can accomplish more by employing professional 
exporters than by depending upon either his own 
export department or upon foreign branches. 

14. Early merchants replaced by agents. — The 
larger part of our export trade is handled thru middle- 
men, who are generally known as exporters and im- 
porters. If they buy and sell on their own account, 
they are properly called merchants. If they act only 
upon orders from abroad, and if they receive their 
pay in the form of a commission from the foreign 
buyers they are generally called commission mer- 
chants. They are known as export agents if they 
receive a commission from the exporting manufac- 
turers in the United States. In theory, these dis- 
tinctions may be drawn rather closely, but in practice 
the field of each class overlaps that of the other. 

Our export trade, then, is carried on both by agents 
and by merchants who buy on their own account and 
at their own risk. The earlier American exporters 
were merchants. In England and Germany the mer- 
chant system figures prominently in foreign trade. 
Of recent years in the United States, not the mer- 
chant but the export commission house has been the 
dominating figure in our trade. In New York alone . 


there are over six hundred such houses, and still others 
are situated in the other important seaports of the 
country. Some of them have acquired great magni- 
tude, prestige and influence, and have become indis- 
pensable in the development of our foreign trade. 
Less than twelve of these concerns handle one-fourth 
of the entire export trade of the United States; two 
control half our trade with China; and probably be- 
tween 60 and 70 per cent of all the export trade of the 
country is under the direct control of these middle- 

15. Position of the export commission house. — The 
relation between the manufacturer and the export 
commission house has been the subject of much dis- 
cussion for many years. A strenuous eiFort has been 
made to wrest from the commission house some of the 
influence that it exerts over our foreign trade — an 
effort which is strictly in keeping with the general 
tendency to eliminate the middleman. To be sure, 
the growth of our manufacturing corporations and 
the expansion of our export trade justifies the manu- 
facturer, in certain cases, in dispensing with the serv- 
ices of the commission house. But while it is true that 
some of these houses have been guilty of irregular 
practices, it should be said in their defence, that the 
overwhelming majority strenuously oppose any deal- 
ings that are at all questionable. A just opinion of 
the worth of the commission house can be based only 


upon a thoro knowledge of their position, the nature 
of their service and the methods which they employ. 

16. Definition of the commission house. — It is 
almost impossible to give an accurate general defini- 
tion of the export commission house, since the spheres 
of activity covered vary with different houses. Con- 
sequently, it is hard to discriminate between the es- 
sential and the incidental characteristics of this type 
of business enterprise. In its simplest form, a com- 
mission house is a firm that acts as buyer for foreign 
customers — merely executing their orders and charg- 
ing for its services a certain rate of commission. This 
definition describes only the essential features com- 
mon to all commission houses. How greatly these 
institutions differ in other respects is apparent from 
the following statement concerning exporters, made 
by Gustav Vintscher, the president of one of the 
largest New York exporting houses, the Markt and 
Hammacher Company: 

There is a difference between exporter and exporter. We 
have those who work on antiquated lines, sit behind their 
office desks with nothing more than an office expenditure, 
wait for indents from their clients to bring what they ask 
for, charge a small commission for financing, and then are 
done with the business. There are exporters who are live 
and are progressive, who have their traveling men all over 
creation carrying extensive sets of samples. There are ex- 
porters who even carry stock in different parts of the world, 
and so to speak, take the position of the manufacturer's 
foreign agent. 

17. Commission house as merchant. — When an 


exporter carries his own stock of goods he is no longer 
a commission merchant, but a merchant. Today 
there are very few merchants, pure and simple, among 
the American exporters, tho some of the latter 
occasionally assume the character of merchants in con- 
nection with certain lines and a limited market — for 
example, when market conditions render the carrying 
of stock advisable or necessary. In some markets, the 
combination of commission merchant and merchant is 
tabooed. Mr. Welding Ring says that Australians 
would not deal with an export commission house 
which, while serving them, at the same time traded 
on its own account, because, they assert, these two 
branches cannot be conducted in harmony. 

It should be borne in mind that whenever a commis- 
sion house acts in the capacity of a merchant — in other 
words, whenever it buys goods without being ordered 
to do so by a foreign buyer, and with the intention of 
selling them at a higher price than it paid, it has no 
right to ask a commission. Whenever a commission 
is charged, the merchant no longer acts merely as a 
buyer or a seller. So any other profits, such as 
"private discounts," are considered by the trade 
"irregular and calculated to deceive clients." 

18. Advantages offered by the commission house to 
the foreign buyer. — The export commission house 
could not have acquired its present significance and 
influence if those who used its services had not derived 
advantages from it. There are two distinct classes 


that the export commission house serves: the foreign 
buyer and the exporting manufacturer. 

First, the advantages that the foreign buyer secures 
from deahng thru an export commission house should 
be considered. The chief advantage is a general 
simplification of transactions. Instead of correspond- 
ing with fifteen manufacturers located at various 
places, he writes a letter to one commission firm, com- 
bining many orders in that one letter. After the 
commission house has distributed the respective orders 
to the various manufacturers and collected their goods 
in one consolidated shipment, one bill of lading is made 
out and one draft is drawn on the buyer. Instead of 
there being the necessity of making out shipping 
documents such as insurance papers, consular invoices 
and the hke, for each order, it is necessaiy only to 
make up one set for the entire shipment. There is a 
consequent saving in postage, clerical work, and 
freight and port charges. Then, too, the export com- 
mission house, since it is in close touch with manu- 
facturers, can often secure the latest style of goods on 
the market. It can act as intermediary between the 
manufacturer and the buyer, and, when complaints 
are made, can materially assist in adjusting them. 
The export commission house frequently finances the 
foreign buyer. It draws on him a sixty to ninety-day 
draft, in other words, grants him long-term credit, 
which the manufacturer is unwilling to do. 

These advantages are not appreciated equally in 



different parts of the world. European importers, 
for instance, generally dislike to deal thru American 
export commission houses, and many South American 
concerns also prefer not to do so. Importers in Aus- 
tralia, South Africa and the far East, on the other 
hand, freely make use of the foreign export commis- 
sion house in dealing with foreign countries. 

19. Advantages offered by commission house to 
exporting manufacturer. — The advantages that the 
export commission house offers to the exporting manu- 
facturer are of various kinds. They lie largely in the 
trade connections which, by long and constant effort 
and by the use of a variety of methods, the commission 
house has established in various markets. Few manu- 
facturing corporations can afford to develop and main- 
tain an export organization as efficient as that 
possessed by most commission houses, to sell the 
products of hundi-eds of manufacturers and to repre- 
sent large buyers who carry on transactions in great 
markets. But the commission house is in a position 
to distribute economically and effectively the large 
output of one factory over a wide territory, and to 
combine the exportable surplus of a number of 
factories and place it where the demand exists. 

Besides the ability to create the demand that 
governs the distribution, incidental to selling, the com- 
mission house offers other inducements to the manu- 
facturer. It pays cash for goods, and in so doing 
takes upon itself, the uncertainty of the credit 
arrangement that is made between the American seller 


and the foreign buyer. The following illustration 
will make clear what has just been said: Exchange 
with Brazil during the year 1914 varied so widely that 
at times the extension of credit to a Brazilian buyer 
would have meant the payment of $100,000 that he 
owed and would have required $125,000 in value in 
Brazilian paper money at the time the bill became pay- 
able. Under such conditions, how much chance would 
there be for an independent exporter to get full pay- 
ment, indeed any at all? 

20. Efforts of the exporter to support the commis- 
sion house. — In many cases, even if a commission 
house handles the export business of a manufacturer, 
the latter will find it advantageous to build up 
auxiliary advertising and selling campaigns. The 
advertising is usually left entirely to the individual 
American exporter. Frequently, the American ex- 
porter sends special sales representatives to travel 
with the salesmen of the export commission house, to 
teach them how to sell the exporter's goods. In such 
cases the representative of the exporter is known as 
a "specialty salesman." 

21. Relation of the commission house to the foreign 
agents. — In some markets the export cormnission 
house is the most efficient selling force, while in others 
exclusive foreign agents bring the best results. 
Manufacturers frequently employ the services of both 
in selling their product abroad. Care must be taken 
to secure a proper coordination of the two agencies. 
No firm should sell thru a commission house to a terri- 


toiy that has been reserved for an exclusive foreign 
agent. It must be insisted that the commission house 
give sufficient information concerning the destination 
of the goods it sells to supply the exclusive agent 
adequate protection. 

22. Recent inroads in the field of the commission 
house. — Of late, the export commission house has 
been losing some ground, partly on account of the 
world-wide tendency to eliminate the middleman and 
partly because of the change in the nature of our for- 
eign trade. Since staple commodities constitute the 
mainstay of the commission house business, the in- 
creased specialization in our manufactured exports 
has limited the sphere of the export commission house 
and consequently caused it to lose ground. The com- 
mission house has been hurt also by the development 
of certain great American corporations into organiza- 
tions of world-wide influence which, only in excep- 
tional cases, employ the services of outsiders to de- 
velop their foreign business. 

It is said that an increase in the volume of special- 
ties handled does not compensate the commission house 
for the loss of its staple business. Such a house can 
make more money by accepting as small a commission 
as one per cent on staple commodities than by insisting 
on receiving five or ten per cent on specialties. The 
explanation is said to lie in the handling of staples. A 
large order for cotton-piece goods, the record of which 
fills only one line in the ledger, is relatively more prof- 
itable than an equally large order for miscellaneous 


hardware, the hsting of which fills many pages of the 

23. New services of the export commission house. 
— To forestall further loss in their share of the na- 
tion's trade, the commission houses are giving more 
and more attention to a branch of activities which is 
not exclusively their own — namely, the introduction 
of new American goods. Some difficulty is experi- 
enced in this connection owing to the fact that the real 
function of the commission house is not to help to in- 
troduce American commodities but to enable the for- 
eigner to make the wisest possible selection of them. 

In order both to introduce new lines and to keep 
in close touch with its foreign clientele, the large com- 
mission house maintains an organization in the foreign 
market ; this may be in the form of a branch house, a 
local agency or a force of traveling salesmen. 

24. Limitations of the commission house service. 
— From the foregoing discussion, it is evident that the 
sphere of the commission house is by no means un- 
limited. It is seldom advisable to appoint an indi- 
vidual commission house as an exclusive agent, for 
while its clientele might be strong, and while its clien- 
tele might be enlarged by means of effective advertis- 
ing and selling campaigns, we must keep in mind that 
no commission house possesses a monopoly in any 
foreign territory, and that it would therefore be 
unwise to shut oneself off from the buyers who habit- 
ually purchase thru other American commission 
houses operating in the same territory. Moreover, 


the manufacturer should himself strive to create a 
demand for his goods, and not merely, trust matters 
to the commission house. Mr. Kies of the National 
City Bank of New York, makes this requirement clear 
in the following statement: 

I want to emphasize this point to the manufacturer who 
is starting in the field for the first time, that the export house 
gives an opportunity to do business with the least trouble 
and expense to himself. It is up to the manufacturer, how- 
ever, to build up the demand for his particular product. If 
the manufacturer, by judicious advertising and promotion 
work, will open up a market for his goods, he can very read- 
ily rid himself of the other troubles in connection with the 
export business by utilizing the services of the export house. 

There are various agency services at the disposal 
of the manufacturer who wishes to avoid the media- 
tion of the commission house, principally the services 
of the merchant and of the manufacturer's agent. 

25. Merchant system; loaning cajntal to foreign 
importers. — In the United Kingdom and Germany, 
the merchant system is stronger than it is anywhere 
else. There is considerable difference between the 
methods employed by the export merchant of London 
and Hamburg respectively. The British export mer- 
chant is practically a financier, and he loans his capital 
for orders. Such a British house, for example, 
decides to place £50,000 sterling in South Africa. 
Certain importers who are thoroly well known to the 
principals are given varying credits — £15,000 to one, 


£10,000 to another, etc. These (South African) 
importers order from England such goods as they 
please. Their bills are paid by the British export 
merchant, but the latter does not interest himself in 
the character or the source of the goods ordered. He 
simply restricts the amount of money which he is 
willing to advance for each customer, who is obligated 
to that amount by interest-bearing notes or other 

The German export merchant, on the other hand, 
usually loans his money on goods which he sells him- 
self. He is anxious to tie his foreign customers to 
him by keeping the origin of the commodity sold con- 
cealed from the buyer. For that purpose, all marks 
of origin are removed from the goods, which are re- 
packed and marked with the export merchant's own 
signs of shipment. 

It is believed in some quarters that the export mer- 
chant will play a more important part in the future 
of the American export trade than he has in the past. 
The difficulties of the export commission house on the 
one hand, and the narrowing of the margin of profit 
generally experienced in American business, will call 
the export merchant to the front. The necessity for 
more liberal credit, granted by American exporters, 
will tend towards a change in the same direction. A 
closer cooperation between the American exporting 
manufacturer and the exporting merchant will do 
much towards aiding in the exploitation of foreign 
fields, which today are largely left almost uncontested 


to the European competitor. This may be true, par- 
ticularly of our export trade in cotton piece-goods. 

26. Manufacturer's agent. — The commission house, 
as we have seen, is primarily the representative of the 
foreign buyer, and not of the exporting seller. The 
merchant, on the other hand, is nobody's representa- 
tive. He buys where he pleases and sells where he 
pleases, and is governed only by his desire to serve 
his own best interests — in other words, his aim is to 
pay the lowest and to obtain the highest possible 

It is not surprising to find that a third agent is 
rapidly assuming a position of importance; namely, 
the manufacturer's agent. The function of this agent 
is like that of a commission house. The agent exerts 
just as much effort, and uses fully as much skill to 
obtain the best markets for the products ©f the export- 
ing manufacturer, as the export commission house 
does to find the most advantageous sources of supply 
with which to fill the indents received from the 
foreign buyer. Each of those agents usually special- 
izes in a particular line and represents a large number 
of manufacturers. 

The new type of export commission men has good 
prospects in view of the fact that American exports 
are undergoing a momentous transition from the 
status of self-selling staples to that of manufactures, 
for the disposal of which, because of their competi- 
tive nature, a vigorous sales' campaign is absolutely 


27. Canadian practice. — Generally speaking, all 
that has so far been said in this chapter applies to 
Canada as well as to the United States. The differ- 
ent methods of exporting, the different types of mid- 
dlemen, and the pros and cons on each point are more 
or less the same for both countries. It will only be 
necessary to note a few points of difference due to lack 
of experience in export trade, and to give a general 
picture of conditions. 

As in the United States, a nimiber of the larger 
concerns have their own branch houses or agencies 
abroad. These are the firms that blazed the trail for 
the export of manufactured articles to foreign mar- 
kets. Most of the large agricultural implements 
companies and some of the large iron and steel com- 
panies have adopted this method. 

Quite a number of companies in various lines of in- 
dustry employ their own traveling salesmen in the 
leading markets. Sometimes two or three allied con- 
cerns, for instance in the implement trade, become 
jointly responsible for the maintenance of these sales- 

A good deal of Canada's foreign trade and a rather 
larger proportion than in the case of the United 
States — is negotiated by mail, the result of the send- 
ing of catalogs, the chance reading of advertise- 
ments and considerable correspondence. The larger 
proportion in the case of Canada is due to the fact 
that so much of our trade is of the casual sort, too 
many Canadian manufacturers in the past regarding 


the foreign market as merely a good outlet for an 
occasional surplus due to a depression in the home 

28. Commission houses in Canadian trade. — It is 
probably true that the majority of Canadian export- 
ers deal thru commission houses or thru local com- 
mission agents in the foreign markets. Unfortu- 
nately there are only a few Canadian commission 
houses doing business overseas, and these are for the 
most part engaged in the foodstuffs and provision 
trades which, like the lumber trade, are staple and 

An increasing number of Canadian firms are form- 
ing connections with local commission agents in the 
export countries. This is the practice recommended 
most frequently by Canadian Trade Commissioners 
abroad. Care must be taken, however, to secure only 
responsible agents. 


Enumerate and describe the different methods of dealing di- 
rectly and indirectly with the foreign market. 

What advantages does an exporting manufacturer obtain from 
branch offices ? 

State the nature of the work of a foreign local agent and the 
advantage of employing him. 

What is the role of the forwarding agent, and what services 
does he render ? 

In what respect are we at a disadvantage in parcel post facili- 
ties compared with foreign nations ? 

Describe indirect exportation thru export merchants, thru 
commission houses and thru manufacturers' export agents. Dis- 
tinguish particularly between the last two. 



1. Need of cooperation. — It has been pointed 
out at various places in this Text that our exports of 
manufactured articles — specialties and staples — are 
increasing in number. Of these, staples are the more 
competitive by nature. Their sale in foreign mar- 
kets meets the severest competition, a competition 
which it is extremely hard for the American exporter 
to overcome because the laws of the United States 
place him at a disadvantage as compared with his 
foreign competitors. The most conspicuous handi- 
cap of the American manufacturer or merchant who 
enters the race with these competitors is his inability 
to combine or to cooperate with others as his foreign 
rival does. 

It seems strange that uncertainty as to his legal 
status compels the American producer to indulge in 
cut-throat competition with his neighbors in order to 
market his products in foreign countries. This state 
of affairs is proving a serious obstacle to the efforts 
that are being made at present to increase the foreign 
trade of this country. It forces the American 
exporter to meet single-handed the strong combina- 
tions that exist, not only among his foreign selling 



competitors, but also among the buyers of many of 
our staple commodities. An organized foreign de- 
mand is allowed to control our widely scattered sup- 
ply. England permits combinations that our Sher- 
man Anti-Trust Law declares unlawful; France en- 
courages such combinations; and Germany goes even 
further by sometimes actually compelling its citizens 
to enter into them, as the history of the Potash Syn- 
dicate proves. 

2. European methods. — Not satisfied with encour- 
aging the expansion of foreign trade by building up a 
powerful merchant marine, by creating an effective 
system of branch banks, and by investing billions of 
dollars in foreign markets, the leading commercial 
countries of Europe — and to a lesser extent Japan — 
have perfected foreign sale organizations that make it 
possible for the members to combine their efforts ef- 
ficiently in both domestic and foreign trade. 

In a summary of the report of the Federal Trade 
Commission which is entitled "Cooperation in Amer- 
ican Export Trade," the situation in the most 
important commercial countries, as regards export 
combination and cooperation, is described as follows: 

In Germany, prior to the war, there were 600 important 
cartels, i.e., combinations to control the market, embracing 
practically every industry in the P^nipire. iVIany dominated 
the export trade of their industries and carried on vigorous 
campaigns to extend their foreign business, to prevent cojn- 
petition among German producers in foreign markets, and 
to secure profitable prices. Thus the German dye-color in- 
dustry operated as a unit in foreign trade under the leader- 

XV— 9 


ship of two great groups of allied producers, the Badische 
group and the Hochst-Casella group, which were working 
under agreement to avoid competition between themselves for 
50 years. The manufacture and exportation of electrical 
equipment has been made one of the bulwarks of German for- 
eign trade by two great companies, the Allgemeine Elek- 
tricitates Gesellschaft and the Siemens-Schuckert, with nu- 
merous subsidiaries at home and abroad working in harmony 
with each other. Half of the $150,000,000 worth of coal 
and coke exported annually was sold by one central selling 
agency, maintained by the great Rheinisch-Westfalische coal 
syndicate, of which the Prussian Government mines are mem- 
bers, and which embraces the bulk of all the coal and coke 
production of the Empire. Practically all the rapidly in- 
creasing and highly valuable iron and steel export business 
was handled by the single selling agency of the Stahlwerks 
Yerband, the aggressive union of German iron and steel man- 
ufacturers which has actively fostered foreign business thru 
export bounties and other means. 

In France and Belgium, syndicates of iron and steel, coal, 
glass, and other industries were strong factors in domestic 
and foreign trade. Silk-ribbon manufacturers of France 
and Germany conducted their export trade in accordance 
with a joint agreement. In Italy, Russia, Austria-Hungary, 
Switzerland, Sweden, Greece, Argentine, Chile and Ecuador, 
central organizations unite the interests of producers in va- 
rious industries such as coal, iron, and steel, agricultural 
machinery, oil, sulphur, superphosphates, cement, matches, 
chocolate, embroidery, silk goods, watches, cotton goods, 
condensed milk, canned fish, currants, quebracho, iodine, 
iiacao, etc. 

In Japan an export organization of textile manufacturers 
is rapidly obtaining the rich cotton goods trade of North 
China. The trade in tea is controlled by a nation-wide 
**tea council." One great Japanese firm, which in itself com- 
bines manufacturing, mining, shipping, and merchandising 
enterprises, is rapidly extending Japanese trade in all lines 
thruout the far East, and the Japanese government is di- 


rectly assisting the development of shipping, banking, and 
trading for foi-eign business. 

British manufacturers have relied more fully upon an un- 
usually effective merchandising organization for foreign 
trade, long established in foreign markets and giving British 
products a superior representation there, but in various im- 
portant industries they have gone much further. Thus, most 
of the great coal-export business is done by powerful organ- 
izations, combining mine operations, marketing companies, 
shipping lines, and foreign distributing companies. This 
gives British coal its grip on the rich South American market. 
British cement manufacturers are united in a strong and suc- 
cessful union for the extension of their overseas trade. Re- 
cently a number of large British manufacturers of machinery 
of all sorts have formed the Representation for British Manu- 
facturers, Ltd., an organization to handle their business in 
certain important foreign markets and to carry on an aggres' 
sive campaign for its extension. Similar organizations for 
foreign trade are in process of formation among other Brit- 
ish manufacturers. In the electrical, cotton-textile, potterjv 
tobacco, wall-paper, iron and steel, and various other indus- 
tries strong associations and combinations are important 
factors in foreign and domestic business. 

3. Isolation of the American exporter. — It is 
against such powerful organizations that liundreds of 
comparatively small American producers and manu- 
facturers must compete for foreign trade. Not less 
serious is the danger threatening the American seller 
from highly effective combinations of foreign buyers 
which he encounters in various markets. During the 
great European war this situation has been evidenced 
in striking examples. Again and again the Ameri- 
can seller has had to submit to the dictation of for- 
eign buying committees, some of which represent the 


collective buying power, not merely of a single nation, 
but of groups of nations. The cotton-grower felt 
the weight of this power of organized demand dur- 
ing the year 1914 as well as during the early part 
of 1915. 

4. American copper abroad. — But the war merely 
emjihasizes a condition that exists even in normal 
times. John D. Ryan, President of the Amalgamated 
Copper Company, has shown, for the benefit of his 
own industry, the conditions that prevailed before the 
European war. He compiled figures covering a 
period of ten years, ending 1913, which prove beyond 
doubt that a number of large copper-producing com- 
panies, representing about one-half the copper pro- 
duction of this country, sold 2,580,000,000 pounds to 
domestic consumers at 15.21 cents per pound, deliv- 
ered at home, while the foreign consumers got their 
2,980,000,000 pounds at 14.38 cents per pound, deliv- 
ered at foreign ports, that is, at a price more than five 
per cent below the domestic price. This deplorable 
condition is the result of a policy which allows buying 
forces to combine and organize while selling forces 
icuuiin scattered. 

5. Prussian government and German potash. — 
The policy of this country as regards the exportation 
of natural products is in strong contrast to that of the 
German Empire. Many will vividly remember the 
potash controversy of 1911. At that time the Ger- 
man government took the position that the potash 
deposits of Germany were a part of her great natural 


resources, and that the production of these deposits 
for the exporting trade should be regulated in such a 
way as to bring the greatest possible returns from 
other parts of the world where the potash was needed 
and, again, in thus regulating the production, the 
German govermnent would merely be conserving the 
resources of the country to the use of which its people 
were justly entitled. The problem was finally solved 
thru the formation of a government-controlled semi- 
compulsory syndicate, a form of combination which, 
in this country, would veiy probably have been de- 
clared as unlawful. The potash situation is only one 
illustration of the methods that Germany practises 
when such conditions prevail. In the case of the 
United States, the method of handling the supply of 
copper furnishes a similar illustration to that of the 
system adopted in Germany. 

There are other cases of a like nature. Thus, our 
exporters of lumber, in selling to Australia and 
Europe, encounter conditions similar to those in the 
copper trade. Austrian textile manufacturers have 
a buying combination to import their raw cotton. 
The cooperative wholesale societies of Great Britain 
control organizations maintained by 14,000 coopera- 
tive societies. It is said that combinations of British 
coal brokers fix the contract price for bunkering ships 
at Newport News. And four London firms which, 
together, are known as the Fixing Board, daily set the 
price of silver for the world, and American mining 
companies must sell their silver for the English and 


the great Indian market to one of these four houses. 
It seems hardly reasonable to expect the American 
exporter to take a stand all alone against such com- 
binations. A New York lawyer strikingly described 
the position of American exporters in the following 
words : 

If you can imagine a squad of recruits, responding pa- 
triotically to their country's call for foreign service, paying 
for their equipment and training out of their own pockets, 
studying their equipment without any aid from the govern- 
ment except a correspondence course of instruction, and 
then, without any company or battalion drill, being sent to 
the front with the plaudits and best wishes of their country, 
and with the warning that if they ever drill or fight, as a co- 
ordinated army, or in any way, except as unrelated individ- 
uals, they will be liable to court-martial and public punish- 
ment upon their return, you have a very good idea of what 
your predicament is now. 

6. Smaller manufacturer handicapped. — Naturally 
the smaller manufacturer suffers most from the pres- 
ent state of affairs. The Federal Trade Commission 
sent out, in 1915, an elaborate questionnaire to man- 
ufacturers. One of the questions was, whether the 
manufacturer would like to be able to cooperate in 
foreign trade. Of the thousands of replies that were 
received, 85 per cent were in the affirmative. 

Relatively few of the larger organizations of the 
country manifest a desire to enter into extensive co- 
operation in foreign trade. As a rule they are strong 
enough to finance and protect their own enterprises. 


In one sense, the large American corporations, corre- 
spond to the European cartels. But the American 
combinations of large businesses in most cases include 
the manufacturing industry, while the German cartel 
usually has to do with the selhng alone. Therefore, in 
the export business done by our large concerns like the 
United States Steel Corporation and the United 
Fruit Company, there is not tlie appearance of coop- 
erative effort, because each firm is really a complete 
unit. The European cartel, on the other hand, is a 
good example of cooperation, for while the independ- 
ence of the member concerns is presei'ved, they all 
form together, one gi-eat combination. As far as our 
large corporations are concerned, American methods 
differ only in form from the European. 

Our smaller industrials seem to find that the cost of 
engaging singly in foreign trade is prohibitive and 
that the risk is too great. Warehousing and credit 
facilities are not so freely available to the small export- 
ing manufacturer as they are to the large corporation. 
It is claimed by those who do not believe in the need 
of cooperation among American exporters, that the 
export commission house renders the service that 
cooperation is intended to perform. It is true that a 
commission house is in the nature of a joint selling 
agency of various manufacturers and, as such, offers 
certain advantages that cooperation is meant to secure. 
But, if possible, it is preferable to build up a joint 
selling agency of manufacturers on a cooperative 
basis, utilizing the manufacturers' own resources and 


facilities. In any case, the American manufacturer 
should be freed from the legal impediments that the 
anti-trust law places in his way when he attempts to 
extend foreign sales. 

7. Advantages of cooperation. — Many engaged in 
foreign trade are convinced that it would probably be 
possible to remove the difficulties which today hamper 
our small manufacturers in their efforts to increase 
tlieir exports, or that at least these difficulties could 
be lessened, if our manufacturers should be allowed 
to cooperate. In connection with the services of the 
forwarding agent, it was shown how, by means of co- 
operation, duplication of clerical work can he avoided 
by consolidating a number of small shipments into one 
large one. But there are many other advantages that 
several concerns interested in foreign trade can derive 
by working together. 

The conditions of foreign markets must be investi- 
gated with a view to securing information on the fol- 
lowing important points: the adaptability of prod- 
ucts to various markets, the right cliaracter of com- 
mercial representatives, the competition that prevails 
in any given field, transportation rates and facili- 
ties, insurance, tariffs, methods of payment, and 
finally — and this is very important — the credit stand- 
ing of the prospective clientele. The small manufac- 
turer cannot afford the expense of such a broad and 
thoro preparation, but if that expense is distributed 
among many, there is justification for taking the 
necessary steps. Furthermore, the reduction of the 


selling expense that results from its distribution 
among several concerns, may permit a reduction in 
the sales price that will materially increase the sala- 
bility of the product. 

8. Various forms of cooperation. — Cooperation in 
foreign trade, in the widest sense, includes many 
phases. It involves informal agreements relating 
solely to foreign trade, between two or more individ- 
uals or concerns. It may result in an incorporated 
joint selling agency, or possibly in a powerful com- 
bination like the foreign cartel and the syndicate. It 
is not likely that, in the near future, the interpreta- 
tion which the people of this country now put upon 
business relationship will undergo such a change tliat 
the cartel or the syndicate will be introduced into oiu* 
economic life. The strength of this form of coopera- 
tion depends largely upon the protection granted to 
it by the courts ; the latter fine any parties that break 
their agreements, and they insist upon the payment of 
the fines. Since the cartel and the syndicate have 
proved most successful in European countries, a de- 
scription of their general features and policies may 
prove valuable to the American business man and 
may, perhaps, enable him to work more successfully 
for the establishment of a new form of cooperation, 
especially adapted to American conditions. 

9. German cartels and syndicates. — Particularly in 
Germany the cartel and the syndicate have been 
developed to a high degree of perfection. While in 


the American trust, or holding company, two or more 
concerns are united in an ownership that may be either 
complete or partial, in the German cartel each of the 
member firms possesses absolute independence. The 
cartel, as a whole, merely supervises the member 
organizations in their various activities to insure that 
none breaks its agreement. Without interfering 
with the manufacturing end, the cartel generally 
serves as a joint buying agency, and, in that capacity, 
secures raw material at a price lower than that which 
an individual firm would have to pay. 

There are several different kinds of cartels. Some 
have to do only with the regulation of business methods 
— in other words, their work concerns terms of pay- 
ments, terms of sales, distribution of samples and 
the like. The price cartel, as its name implies, auns to 
control prices, and to this end attempts to influence 
the contracting parties to come to an agreement con- 
cerning prices, and to publish a common price-list. 
In the highest form of the price cartel, each of the in- 
dividual member firms is subject to one of the follow- 
ing conditions: it must deal with one specified class 
of customers ; it must do business in one specified ter- 
ritory; it must produce one specified class of com- 
modity, or, if it deals in a common commodity, it 
must produce only that amount which the cartel shall 
specify. By establishing a maximum output for 
member concerns, the cartel can exercise a powerful 
influence over prices. Finally, the cartel can equal- 


ize profits by pooling the excess profits made by some 
member firms, in favor of those that fail to reach a 
given standard of earnings. 

The syndicate is a sales cartel. It is a joint sales 
department composed of all the members, who retain 
independent management only as regards their 
factories and mines. 

10. Strong expart iwlicies. — The stronger cartels 
in Germany maintain a firm export policy. In many 
cases they pursue the practice of charging for their 
exports lower prices than those which the domestic 
consumer is asked to pay. The justification of this 
policy lies in the fact that, on account of the magni- 
tude of present-day capital investments in factories, 
it is imperative to strain every effort to keep the fac- 
tory going to its gi-eatest capacity. The foreign mar- 
ket is therefore sought as a valuable outlet for excess 
production, particularly in times wlien the home mar- 
ket is dull. To increase further the export trade of 
their respective members, as early as 1891, several 
cartels and syndicates adopted the export-bounty pol- 
icy. Since that time, various exports, especially iron 
and steel manufactures, have been subsidized. The 
cartels controlling the production of coal, iron, raw 
steel and similar products, have supplied inland man- 
ufacturers with materials at reduced rates, when such 
materials went into export manufactures. This pol- 
icy is one of the secrets of the extraordinary success 
of the exporting industries of Germany in the world 


These cartels and syndicates are, in turn, often sub- 
sidiaries of great financial institutions that control 
their policy. A network of financial interests with 
ramifications all over the world, makes the German 
export organization a powerful combination of Ger- 
man finance and industrj'^, encouraged by the govern- 
ment. The individual American will compete in vain 
with this tremendous force in his effort to conquer 
foreign markets unless he follows the example of the 
German and makes use of strong business combina- 
tions. The German method — undoubtedly the best 
in Europe — is only one illustration of European prac- 

11. Greater necessity for cooperation after the 
European war, — It has been repeatedly stated that 
this tendency to combine and cooperate in order to 
gain strength and efficiency will become even stronger 
after the European war than it is now. The will to 
conquer, the ability to organize and, fijially, the will- 
ingness of the individual to subordinate himself to tlie 
interests of the whole group will be greatly empha- 
sized as a result of the conditions brought about by 
this war; and all these factors, combined, will go far 
to prevent the material destruction and personal losses 
caused by the war from seriously hurting European 
commerce and industry. There is, consequently, an 
increasing need that the United States place those 
who are to fight its commercial battles upon an equal 
footing with their opponents. 

12. Becent attempts to bring about cooperation. 


— Encouraging steps have been taken in this direc- 
tion. The formation of the American International 
Corporation represents the most important effort so 
far to bring about the proper coordination between 
banking, transportation, commercial and manufac- 
turing interests. This organization, which stands as 
a landmark in a new era of American business, should 
be the forerunner of many similar institutions. 

Nor are pioneers in trade cooperation lacking. 
Altho it is by no means a new idea to attempt to de- 
velop American trade in a particular market thi*u the 
establishment there of a local enterprise controlled by 
a combination of manufacturers, nevertheless experi- 
ments of this sort have, up to this time, met with little 
success. As far back as thirty years ago, a combina- 
tion of six or eight American manufacturers of differ- 
ent kinds of shoes, established a syndicate in London 
which, during the time of its existence, was fairly suc- 
cessful and stimulated the American exports of boots 
and shoes to Europe. 

13. International Manufacturers* Sales Company 
of America. — ^Whether or not recent efforts of this 
kind will prove more successful, time alone can tell. 
A conspicuous example of this new development in 
the American export business is found in the creation 
of the International Manufacturers' Sales Company 
of America. This is a $100,000 corporation with 
headquarters at Chicago, organized, financed and con- 
trolled exclusively by manufacturers. Its principal 


object at present is to foster the trade of its members 
in Russia, and later on to do the same thing in other 
countries. Since reciprocity is the best foundation of 
foreign trade, the company also aims to develop the 
exportation of goods of Russian origin from Russia 
to the United States. 

The stock is held by fifty manufacturers of non- 
competing lines and each manufacturer has equal 
rights as regards all operations, property and earn- 
ings of the company. An investment of two thou- 
sand dollars gives a manufacturer the right to estab- 
lish his own branch house in Russia. The Chicago 
office, the real center of the organization, is controlled 
by a board of directors. The members are elected 
from among the manufacturers, who are members of 
the corporation. Thus, full control at all times is in 
the hands of the manufacturers themselves. 

Goods are billed to the company, either at the same 
price as those at which the manufacturer bills goods 
to his branch house here, or else at regular export 
prices. The problem of credit, which has been more 
or less of a stumbling block in the way of direct trade 
with Russia, is solved by the cooperation of leading 

It is difficult to foretell whether or not certain fail- 
ings of human nature such as jealousy, personal 
greed and stubbornness, resulting from too great per- 
sonal independence, will wreck this structure which 
is founded upon cooperation. Up to January 1917 


five branches had been established in Russia. The 
president reports that the volume of business done so 
far surpasses all expectations. All those who wish to 
see cooperative methods introduced into the foreign 
trade of this country will watch with the greatest in- 
terest the operations of this concern, which represents 
only one of several experiments along the same line. 

14. Plan of Mr. W. S, Kies. — The plan described 
above is based largely upon the suggestions that JNIr. 
Ivies of the National City Bank presented in an 
address before the American Academy of Political 
and Social Science. These suggestions are given 
below : 

1. The corporation is to be impartially organized in a 
manner fair to all its members, and the management selected 
with expert ability as the sole test. 

2. Membership in the Board of Directors to be arranged 
so that in due course of time every member shall receive 
representation. To avoid possibility of unfair treatment, 
there will be provided a permanent arbitration committee, to 
be selected in an impartial manner, and to be made up of 
persons having no interest in the industry. This may be 
invoked by any member. 

3. Each member shall, at the beginning of the year, re- 
port to the Export Corporation the amount of its product 
available for export during the year, the conditions of de- 
livery and of acceptance of orders, at the price at which it 
is willing to sell in a foreign market. These tenders may be 
changed from time to time, under such conditions as may be 
thought advisable, and special quotations of additional quan- 
tities may be named whenever desirable. 

4. The sales force of the corporation will undertake the 
disposal of the exportable surplus of its members on the terms 


and conditions specified, obtaining the best price possible, 
making use of the export commission houses, the local repre- 
sentatives, the trained salesman and every agency of value 
in building up foreign trade. The difference between the 
price quoted and the price obtained shall belong to the Ex- 
port Corporation as a profit, and upon all sales all members 
shall pay to the Export Corporation the same percentage as 
a commission. 

5. Whenever a demand shall be found to exist in a par- 
ticular market for a certain quantity of goods which must 
be sold at a lower price than quoted by any of the members, 
in order to meet foreign competition, all members shall be 
notified of the possible order, and given an opportunity to 
meet the foreign price. Competitive bids will be received, and 
the lowest bidder receive the order ; or, if there are a number 
of low bidders, the order be divided. 

6. All profits, after deducting all expenses, and setting 
aside such a sum as shall be deemed necessary for promotion, 
advertising, establishment of permanent quarters, etc., shall 
be distributed equally among the members. 

7. The Export Corporation shall provide an expert who 
shall collect statistical data and information of value to the 
industry, which shall be distributed promptly, and under the 
same conditions, and in the same manner, to all members. 
The Export Corporation shall also have on its staff an effi- 
ciency engineer, who shall make intensive study of methods 
of production in the industr}^ cost of production, competi- 
tive margins, and the productive capacity of various plants. 
His services shall be available to any of the members for the 
purpose of giving advice as to the development of greater 
efficiency In production, diminishing the cost of production, 
or increasing the output. He shall also give to all members 
technical advice as to the best methods of meeting peculiar 
requirements of foreign markets. 

8. The Export Corporation may also act as a purchasing 
agency for raw materials. Being able to purchase In large 
quantities, as a representative of many consumers in a given 


line, it will be able to buy in foreign markets at the lowest 
price. All members will be entitled to the Corporation's serv- 
ices in this respect, upon the same terms. 

15. Legal status of cooperative organizations. — 
There are in existence now several other instances of 
cooperative effort among American manufacturers 
and producers in foreign trade, but all of them have 
to do with competitive lines of trade. What is needed, 
however, more than anything else, is the cooperation 
of firms that produce "competing" commodities — that 
is, commodities which are similar. But the probabil- 
ity of success in this connection is not so great since 
our manufacturers fear the application of the anti- 
trust laws, and their fear is naturally detrimental to 
the energy and initiative that are necessary. 

These statutes, as they are expressed, do not differ- 
entiate foreign trade from interstate trade — for ex- 
ample, the Sherman Act is prohibitory with respect 
to foreign trade, as much as it is with regard to do- 
mestic trade. Altho enacted primarily for the pro- 
tection of the domestic consumer, the anti-trust laws, 
largely because of the lack of clarity in the wording, 
possess this prohibitory force as regards foreign trade. 
Until these laws are amended so as to allow our man- 
ufacturers to cooperate in foreign trade, there can 
be no general participation in American export trade 
by the rank and file of small American manufactur- 

What we want is an answer, and a positive answer ; we do 
not want the surmises of lawyers : Ave do not want the best 

XV— 10 


wishes of gentlemen who are temporary incumbents of gov- 
ernment positions, and wlio tomorrow may not be there. We 
do not want four-year dispensations from attorneys-general 
who will be out of office four years from now. We want the 
definite, positive answers that business men require in any 
enterprise in which they are asked to put their labor and 
risk their capital. 

16. Permissive legislation needed. — The way to 
bring about that cooperation in our export trade which 
is necessaiy for successful ventures in foreign busi- 
ness, is to pass permissive legislation that shall exempt 
foreign trade from the impediments placed upon it by 
the anti-trust laws. 

This permissive legislation should be readily passed 
by Congress. The voluminous debates that preceded 
the passage of the Sherman Act in 1890, while they 
covered every possible phase of the subject, failed to 
suggest or hint in the remotest way that the consumers 
of other countries should be protected by the statute. 
This country, like eveiy other, restricts the scope of 
its legislation to the needs and welfare of its own 
people, and naturally assumes that other countries 
will take care of their own citizens. Therefore, no 
statute is presumed to have extra-territorial applica- 

17. Objection to foreign trade exemption. — Those 
who object to the exemption from the anti-trust laws 
of those engaged in foreign trade argue that coopera- 
tion in export trade would somehow react unfavorably 
upon the domestic trade. But, as a matter of fact, 
our courts are fully in a position, and well prepared, 


to ward off any attack that might be directed against 
the domestic consumer by an export cooperative as- 
sociation or other export combination. It is further 
claimed by those who opposed cooperation or com- 
bination in export trade, that it might be used to the 
detriment of those who remain outside of the coopera- 
tive organization. Apart from the fact that the Fed- 
eral Trade Commission has full power to prevent un- 
fair methods of competition, it is hardly to be expected 
that occasion for friction between those who cooperate 
and those who remain outside Avill arise. 

The outsider either does not wish to join the coop- 
erative organization or is not permitted to do so. The 
man who does not wish to enter believes that he can 
do best by relying upon his own abilities and re- 
sources. Perhaps he hopes that he will indirectly 
benefit from the educational work performed by the 
organization without becoming a member. To estab- 
lish compulsory cooperative organizations seems pre- 
posterous. The other group of outsiders — those who 
are not allowed to join cooperative organizations — 
consists of persons who are excluded because of lack 
of experience or of financial strength. They would 
do better, in any event, to combine among themselves 
rather than to form a weak adjunct of a combination 
of manufacturers stronger than themselves. 

18. Clayton Anti-Trust Law and foreign trade. — 
The fact that great care was taken to exclude from the 
Clayton Anti-Trust Act, which was passed in 1914, 


anything relating to foreign trade, shows that Con- 
gress is aware of the difference between domestic and 
foreign business, as regards the interests of the domes- 
tic consumer. 

Many half-way measures have been suggested with 
respect to relieving the exporter of the burden im- 
posed upon him by the anti-trust laws. Some have 
suggested, for example, that exporters who cooperate 
in foreign trade be exempted from the penalties of the 
Sherman Law, provided they file their plans with the 
Federal Trade Commission, and obtain from the Com- 
mission an order approving of those plans. Others 
have proposed that the Federal Trade Commission, 
or some other judicial body, or perhaps the attorney- 
general, be given the right to determine, whether or 
not in any given case, foreign trade combination re- 
quires the application of the anti-trust laws. This 
last proposition was indorsed by the United States 
Chamber of Commerce. 

19. Federal Trade Commissicm. — The inadequacy 
of such compromise proposals has been recognized by 
the Federal Trade Commission itself, which was 
formed in 1914. President Wilson said: 

The Federal Trade Commission is authorized and empow- 
ered to inquire into and report to Congress not only upon 
the conditions of trade in this country, but upon the condi- 
tions of trade, the cost of manufacture and transportation, 
and all questions of combinations which affect international 
trade between Europe and the United States. It has the 


full power \vhich will guide Congress into scientific treatment 
of all questions of international trade. 

The Commission, which is to be our expert guide, 
in its summary report issued in June, 1916, strongly 
recommended that Congress pass declaratory legisla- 
tion which should remove all doubt regarding the le- 
gality of combinations in foreign trade. The report 
in part reads as follows: 

By its investigation the Commission, however, has estab- 
lished the fact that doubt as to the appHcation of the anti- 
trust laws to export trade now prevents concerted action by 
American business men in export trade, even among producers 
of non-competing goods. In view of this fact and of the con- 
viction that cooperation should be encouraged in export 
trade among competitors as well as among non-competitors, 
the Conmiission respectfully recommends the enactment of 
declaratory and permissive legislation to remove this doubt. 

The Commission feels that it would fail of its duty if it 
did not urge the pressing need of such action immediatel}^ 
If American business men are to make the most of the great 
opportunities now before them, are to build securely in for- 
eign trade, and are to avoid disaster in the shock of the 
stern and determined competition that will doubtless follow 
the war, they must at once perfect the organization de- 
manded by the conditions of international trade. 

20. Webb Bill. — The suggestion of the Commis- 
sion took tangible form when Representative Webb, 
at the instigation of the Federal Trade Commis- 
sion and the Department of Commerce, introduced 
a bill which contains the following provisions: That 
nothing contained in the anti-trust laws shall be con- 
strued as declaring to be illegal, either an association 


which has for its sole purpose the fostering of export 
trade and whicli actually engages solely in such trade, 
or an agreement made, or act done, in connection 
with export trade by such associations, provided such 
agreement or act is not in restraint of trade within the 
United States. The bill was strongly recommended 
by leading exporters and manufacturers in this comi- 
try, and was passed by the House but, owing to lack 
of time, never reached the Senate in the first session 
of the 64th Congress. 

21. The Eccport Association of Canada. — The 
most significant example of cooperation among Cana- 
dian exporters is the recently formed society known 
as the Export Association of Canada. It was incor- 
porated in the summer of 1915. According to its 
j^rospectus, its shareholders include ninety-five Cana- 
dian manufactures, representative of practically every 
line of business, as well as of many of Canada's larg- 
est companies. 

The purpose of the new institution is to build up 
for Canada a permanent trade with other portions of 
the Biitish Empire and other countries. The func- 
tions which the Association sets up for itself are to 
create a favorable strategical position in outside mar- 
kets for Canadian industry as a whole; to secure de- 
tailed information and actual orders for its members; 
to introduce the representatives of Canadian firms to 
the most important buyers in other markets; to find 
reliable export agents for its members in markets 
where representation is required; to collect and make 


shipments of export orders, and where possible to fi- 
nance the same; to organize production in Can- 
ada which will make possible the successful execution 
of large export orders. 

The Association is endeavoring especially to con- 
centrate its efforts in selling, shipping and financing, 
to make it possible for a large number of the smaller 
manufacturers, many of whom have hitherto done 
little or no export business, to open up profitable con- 
nections abroad. At the same time its managers have 
been able to attract some of the larger manufacturers 
who have their own organizations for doing business 
abroad by promising to prepare in foreign markets a 
general strategical field within which they could fol- 
low their own objectives. 

22. OtJier associations. — There are a number of 
commercial organizations which directly or indirectly 
do a good deal to increase Canada's foreign trade. 
The various Boards of Trade or Chambers of Com- 
merce and their provincial associations, which are by 
no means concerned exclusively with foreign trade, 
do a good deal to acquaint manufacturers of the 
needs and opportunities of foreign trade and to dis- 
seminate information and advice in regard to ship- 
ping, credits, rates, insurance, etc. 


Why is cooperation in foreign trade desirable? Why is the 
American exporter at a disadvantage in competing for foreign 
trade ? 

Describe the purpose and operation of the German cartels. 


Describe the International Manufacturers Sales Company of 

What plan of cooperation is proposed by Mr. W. S. Kies? 

How do the anti-trust laws hamper the American exporter? 

Explain the measures proposed for removing the handicaps of 
existing legislation. 

Describe the nature and work of the Export Association of 



1. Soliciting indents. — The origin of export trade 
is the foreign order, or the indent. There are, how- 
ever, several actions which ordinarily precede the niati- 
ufacturer's receipt of a foreign order. Before a for- 
eign customer places an order, he wishes to be in- 
formed concerning the price of the goods, as well as 
their quality and their general nature. Correspond- 
ence, and often the sending of samples, precedes the 
placing of the order. If a manufacturer has so es- 
tablished himself in a foreign market so that his prod- 
ucts are known, these preliminaries are not necessary. 
Nor is it generally necessary to send samples when the 
commission house or any middleman intervenes. 

Until a certain brand of goods is introduced, how- 
ever, either in the domestic market or abroad, the 
sample is sometimes not only an important, but even 
a vital element in successful export trade, for the for- 
eign customer will often insist upon knowing exactly 
the nature of the goods which he is to receive. 

2. Sending samples. — Generally speaking, the 
manufacturer should steer a middle course as regards 
his sample policy. On the one hand, he should use 
samples freely when to do so will increase his sales; 
on the other hand, he should avoid sending samples 



out indiscriminately. He should, at all times, be ex- 
tremely careful not to fall into the hands of "sample 
collectors." The samples should be accompanied by 
personal letters and should be addi'essed only to care^ 
fully selected prospects. The question of charging 
for samples is also a delicate one. If a charge is 
made, a hberal discount should be allowed on the reg- 
ular price, but it should be kept in mind that too great 
a reduction arouses suspicion as to the real value of 
the goods represented by the sample. It seems un- 
wise to send a sample to a foreign customer, unless 
it has been requested, since in many cases the con- 
signee is caused considerable trouble and expense in 
connection with getting it thru the customs. 

3. Samples issued represent goods. — The most mi- 
portant point to remember in sending out samples is 
that they should by all means be representative of the 
goods that they advertise. If a customer, judging 
by samples that he has received, orders goods and 
these do not measure up to the standard of the sam- 
ples, endless trouble is apt to arise. To disapj)oint 
the foreign buyer is much more serious than to make 
this mistake in the case of a domestic buyer, since in 
the former instance the delay resulting from the dis- 
tance separating the two parties renders apologies 
useless — in fact, almost impossible. The British Sale 
of Goods Act — passed in 1893 — which still applies in 
many markets of the world, includes the following 
provisions : 

In the case of contracts for sale by sample there is an 


implied understanding: (1) that the bulk shall correspond 
with the sample in quality; (2) that the buyer shall have 
a reasonable opportunity of comparing the bulk with the 
sample; (3) that the goods shall be free from any defect 
rendering them unmerchantable, which would not be apparent 
on reasonable examination of the sample. 

These represent the minimum requirements that ex- 
porters should fulfil in sending abroad samples that 
will form the basis of future sales. 

4. Price policy. — The next question to be an- 
swered is, What price shoidd be quoted to the foreign 
buyers? This point was touched upon in the discus- 
sion concerning the various agents of foreign trade, 
and the difficulty that arises from the employment 
of commission houses and exclusive agents was ex- 
plained. The use of various agents at the same time, 
makes the question of price policy a rather compli- 
cated one. Furthermore, many items enter into the 
make-up of the foreign sales price which do not ap- 
pear in domestic business, as, for example, ocean 
freight, custom-house duties, dock dues, fluctuations 
in foreign currencies, and gi'atuities and fees for cus- 
tom house brokers. 

Prices must be varied according to the class of cus- 
tomers, the quantity of goods bought, and the terri- 
tory in which the customers are located. In export 
trade the principle of "one price for all" cannot be 

In most cases cash discount should not be given, 
since the same discounts that might induce a domestic 
buyer to pay in casli within the time specified in the 


terms of sale, might have no effect upon a foreign 
buyer, because the rate of interest in his country is 
much higher than it is here. Also, the complicated 
method of quoting discounts, as it is often used in our 
domestic business, should be avoided in foreign busi- 
ness, since foreign importers are often unable to grasp 
the meaning of such quotations. Prices should be 
quoted either in the currency of the importing coun- 
try, or else in sterling, unless the dollar has been suc- 
cessfully introduced. 

5, Details of quotations. — In quotation forms, the 
following features should be specifically and clearlj^ 
indicated: the place where the goods are to be deliv- 
ered; the manner in which the goods are to be packed ; 
the approximate date when shipment is to be made; 
the liabilities assumed by the manufacturer ; the forms 
of marine insurance that will be supplied in case spe- 
cific instructions are given by the buyer; and finally, 
the terms of payment. The length of time for whicli 
quotations hold good should be definitely stated. It 
is unwise to quote prices "subject to change without 

According to place of delivery, discrimination is 
made between f. o. b. and c. i. f. prices. C. i. f. 
means "cost, insurance and freight"; f. o. b. should 
be understood to mean "free on board the outgoing 
ocean vessel." The f. o. b. price, then, ought to 
include all charges for packing, railroad freights, 
lighterage and dock dues, if any, incurred in placing 
the goods on board the steamer. Unfortunately the 


term is being abused by many manufacturers, who 
quote *'f. o. b., factory," or "f. o. b., New York," 
meaning thereby, in the first case, that the price in- 
cludes only those charges up to and including the time 
when the goods were placed in the railroad cars at the 
factory sidings; and in the second case, merely that 
freight charges are paid up to the time the goods 
arrive in New York. This loose way of using the 
term f. o. b. has given rise to much misunderstand- 
ing and consequent dissatisfaction on the part of the 

If the charges for placing the goods on board the 
vessel are not included in the price, the term f. a. s., 
meaning "free alongside steamship," is used. The 
expense for hoisting the goods into the vessel is usu- 
ally included in the freight charge, so in American 
exporting practice f. a. s. has the same meaning as 
f. o. b, (See example of f. a. s. contract, pages 141- 

As has already been said, the letters c. i. f. stand 
far "cost, insurance and freight." In other words, 
the c. i. f. price includes all expenses up to the time 
the goods are landed, but it does not include the for- 
eign import duty, the landing charges, or any 
other item. In this respect the c. i. f. price differs 
radically from the "f. o. b. destination" price, which 
includes all the items exempted from the c. i. f. 
price. A question might arise as to the nature of the 
insurance to be included in the price that is quoted. 


Generally speaking, a "free of particular average" 
policy is considered sufficient. It is advisable, how- 
ever, when insurance is included in the price, to state 
distinctly to what kind of insurance reference is made. 

The object of quoting c. i. f. prices is to enable the 
foreign customer to ascertain exactly what his goods 
will cost him at the seaport of his country. The ex- 
pense of removing the shipment from the steamer can 
be calculated more easily by the consignee than by 
the exporting manufacturer. This fact influences the 
exporter to favor the quotation of the c. i. f. price 
rather than the "f. o. b. destination" price. In each 
case, the liabilities of seller and buyer under c. i. f. 
terms, tho largely regulated by custom and commer- 
cial law, should be set forth clearly in order that all 
possibility of misunderstanding in regard to respon- 
sibility may be avoided. The facsimile of a c. i. f. 
contract given on page 141 shows a detailed enmnera- 
tion of the conditions of sale. 

Variations of the c. i. f. price are the c. f. and 
the c. i. f. & e. The first of these two explains it- 
self. The second includes, in addition to the elements 
of the c. i. f. price, the item of exchange. This 
quotation is used more frequently in trading with 
Australia and South Africa than in trading with any 
other lands. 

The question of foreign credit-ratings and of ar- 
rangements in regard to the payment of the bill will 
be treated in another Text. 



United States Steel Products Company 
general office new york, u. s. a. 

Exporters of the Products of 
Cahxegie Steel Co. American Bbidge Co. 

Illinois Steel Co. The Louain Steel Co. 

American Steel & Wire Co. National Tube Co. 

American Sheet & Tin Pl.\te Co. Shelby Steel Tube Co. 

Tennessee Coal, Iron & Railroad Co. 

No 19.... 





Time of Ship- 

of Sale 

Specifications shall be furnished to the seller by the 
buyer in substantially equal monthly quantities, begin- 
ning on or before the first day of , 19 

and ending on or before the last day of 

19 Buyer's failure to furnish specifications, as 

aforesaid, may at seller's option, without notice to buyer, 
be treated and considered as a waiver on the part of the 
buyer of all right to demand any subsequent delivery of 
the unspecified portion of the goods. 

This contract is subject to Conditions of Sale F. A. S. 
Vessel printed on back hereof. 

It is understood that the seller does not manufacture 
the materials mentioned herein, but is to obtain them 
from such manufacturers as it may select. Such selection 
shall be in the absolute discretion of the seller and shall 
in no way aff'ect any of the provisions of this contract, 


but this right shall not relieve the seller from its obliga- 
tion to furnish material of the kind and quality and at 
the cost herein specified. 



The seller referred to in these Conditions of Sale is un- 
derstood to be the UNITED STATES STEEL 
1. It is understood and agreed that f. a. s. vessel means 
F. A. S. Vessel delivery by the carriers alongside the vessel or at the 
Sales wharf, pier, or other customary place of receiving goods 

destined for shipment by vessel. The seller may, at its 
option, tender to the purchaser or his agent the usual 
ship's receipt or a prepaid railroad bill of lading from 
the works to the port of shipment, providing for free 
delivery by the carriers within the usual lighterage or 
railroad delivery limits of the port, and the tender of 
such ship's receipt or railroad bill of lading shall be full 
and final delivery. In every case, the purchaser agrees 
to furnish the seller, promptly after the sailing of the 
vessel, with a Custom House bill of lading properly 
signed, checked and endorsed, as evidence of exportation. 

In case the seller elects to tender to purchaser the 
usual ship's receipt, the purchaser agrees to furnish 
seller, immediately on the arrival of the goods at port 
of loading, the name of vessel by which shipment is 
desired; and the seller undertakes to place the goods 
alongside vessel, if sufficient time is allowed tlie railroad 
or transportation company, and the vessel in question 
will receive them, but the seller does not assume any 
liability for expenses arising from failure of the railroad 
or transportation company to make delivery within the 
specified time. 

In case the purchaser does not supply the seller, 
promptly upon arrival of goods at port of loading, with 
name of vessel and such other shipping instructions as 
may be necessary, or, in case purchaser designates a 
vessel, of which the date of sailing is such that material 
cannot be held on cars or in railroad warehouse without 
charges accruing, (1) any demurrage or other charges 



made by the railroad company for detention of cars^ 
unloading, storage, etc., and any damage to the goods 
consequent upon such detention or unloading will be for 
purchaser's account and risk, and (2) the seller may, 
at its option, tender to purchaser an order on the railroad 
company to deliver the goods to the purchaser at the 
railroad dock, and the tender of such delivery order shall 
be full and final delivery. 

Execution of 
Orders or 
Shipment of 

and Shipping 


XT— 11 

3-a. The seller shall not be liable for failure to perform 
this contract in whole or in part, if such failure is due to- 
fires, strikes, disputes with workmen, war, civil commo- 
tion, epidemics, floods, accidents, delays in transportation, 
shortage of cars or other causes beyond the reasonable 
control of the seller or of the manufacturer; nor shall 
these exemptions be limited or waived by any other 
terms of this contract whether printed or written; such 
contingencies shall not release the purchaser from his 
obligation to pay for the goods in accordance with the 
terms of sale. Provided, however, that in the event of 
such unavoidable delay the purchaser may, subject to 
previously obtaining the consent of tlie seller, cancel such 
portion of the goods already specified as is not manu- 
factured nor in process of manufacture at the time his 
request to cancel reaches the manufacturer's works. 

2-b. The seller maj' ship any portion of the goods as 
soon as completed at the manufacturer's plant, and pay- 
ment for that portion of the goods shipped shall become 
due in accordance with the terms of payment herein 
specified. Insistence upon suspension of manufacture 
or suspension of any shipment if not acquiesced in by 
the seller may be treated by the seller as a wrongful 
termination of the contract on the part of the purchaser; 
and the purchaser shall thereupon be liable for all 
damages arising out of such termination. 

:5. In the event of the purchaser failing to furnish com- 
plete specifications and instructions within the time 
specified in the contract, the seller shall be entitled, at 
its option, to cancel such portion of the contract as may 
remain miexecuted, or to make shipments in accordance 
with the specifications and instructions which the pur- 
chaser may have furnished for previous shipments on 
account of the same or a previous contract. 

4. If the purchaser requires inspection, it must be 



Damage in 


made at manufacturer's plant, and such inspection and 
acceptance shall be final. Reasonable facilities will be 
afforded to inspectors representing the purchaser to 
inspect material and to apply, previous to shipment from 
the manufacturer's plant, tests to which the seller has 
previously agreed. 

Claims 5. Claims will be considered by tlie seller only when 

made promptly after receipt of the goods and due op- 
portunity has been given for investigation by seller's 
own representatives. No claims for labor nor involving 
consequential damages will be recognized. Goods must 
not be returned except by permission of seller. 

6. The seller agrees that the goods shall leave the 
manufacturer's plant in good condition, and the purchaser 
assumes all risks of rust or other damage during 

7. The goods are to be exported to the destination 
stated by the purchaser at the time the inquiry is made, 
and the purchaser guarantees that the goods will be 
shipped to that destination, and agrees to furnish, if re- 
quired by the seller, a Landing Certificate duly signed by 
the Customs Authorities at the port of destination, certi- 
fying that the goods have been landed and entered at that 

The seller reserves the right, even after partial pay- 
ment on account of any contract with the purchaser, to 
require from the purchaser satisfactory security for the 
due performance of his obligations, and refusal to furnish 
such satisfactory security or the failure of the pur- 
chaser to execute any of his obligations under this or any 
other existing contract will entitle the seller, upon notice 
to the purchaser, to suspend shipments or cancel the con- 
tract, or so much of it as may remain unexecuted, without 
prejudice to any claim for damages the seller may be 
entitled to make. 

Terms 8. Unless otherwise stated in quotation, seller's terms 

are understood to be net cash in exchange for rela- 
tive ship's receipt, to be tendered to bankers approved 
by the seller with whom irrevocable credit is to be es- 
tablished when order is entered and before goods are 

9. Every quotation is based on the understanding that, 



jf accepted and the seller should elect, formal con- 
tract satisfactory to the seller will be signed by the pur- 

United States Steel Products Company 
general office new york, u. s. a. 

Exporters of the Products of 

Carkegie Steel Co. 
Ilxixois Steel Co. 
Abiericax Steel & Wire Co. 
Americax Sheet & Tix Plate Co. 
Texne.ssee Coai^ Irok & Railroad Co. 

American- Bridge Co. 
The Loraix Steel Co. 
National Tube Co. 
Shelby Steel Tube Co. 









Time of 

Specifications shall be furnished to the seller by the 
buyer in substantial equal monthly quantities, beginning 

on or before the first day of 19 . . . 

and ending on or before the last day of . 

19.... Buyer's failure to furnish specifications, as 
aforesaid, may at seller's option, without notice to 
buyer, be treated and considered as a waiver on the 
part of the buyer of all right to demand any subsequent 
deliverj'- of the unspecified portion of the goods. 




of Sale 


This material is produced in part from manganese ore 
and/or chrome ore from British Possessions, and it is 
understood and agreed that this sale is subject to the 
restrictions of the "consumer's guarantee for ores." See 
our circular letter of April 30, 1916. 

This contract is subject to General Conditions of Sale 
printed on back hereof. 

It is understood that the seller does not manufacture 
the materials mentioned herein, but is to obtain them 
from such manufacturers as it may select. Such selec- 
tion shall be in the absolute discretion of the seller and 
shall in no way affect any of the pro\isions of this con- 
tract, but this right shall not relieve the seller from its 
obligation to furnish material of the kind and quality 
and at the cost herein specified. 


The seller referred to in these Conditions of Sale is 
understood to be the UNITED STATES STEEL PROD- 

C. L F. L Tl^e seller accepts no responsibility for the arrival 

and of goods at destination or for loss or damage in transit. 

C. & F. Sales The purchaser assumes all risks of transportation except 
such as are covered by the legal responsibility of the 
carriers (or, on c. i. f. sales, by the insurance), and ac- 
cepts and agrees to all usual and customary clauses 
in the bills of lading as well as such additional clauses 
and stipulations as may be lawfully imposed by the 
carriers as a condition of their accepting the goods for 
transportation. The tender to the purchaser or his 
authorized agent of shipping documents, consisting of 
proper bills of lading, and, in the case of c. i. f. sales, 
negotiable insurance certificate, constitutes full and final 
delivery on the part of the seller, and entitles it to im- 
mediate payment in full for goods shipped, without 
prejudice to the subsequent adjustment of just claims 
on the part of the purchaser. 

Unless otherwise agreed in writing, the purchaser will 
receive the goods at destination ex ship's tackles as fast 
as vessel can discharge, and it is further agreed that the 
seller is entitled to select the route, port of shipment and 




vessel with privilege of stopping in transit at port or 
ports. Unless otherwise agreed in writing, any charges 
at destination, including lighterage, wharfage or landing 
charges, dues, duties, etc., are not included in seller's 

Insurance 2. Unless otherwise stated in quotation, the insurance 

on c. i. f. sales is understood to be marine insurance only 
to destination covered by sales price, free of particular 
average, English conditions, for a sum equal to the 
amount of the invoice plus ten per cent. Other forms of 
insurance, if obtainable, must be agreed upon in writing 
prior to acceptance of order, the additional cost to be 
for the account of the purchaser, but no form of insur- 
ance will protect against rust or other damage unless 
caused by a peril of the sea. 

3. All consular fees for legalising invoices, stamping 
bills of lading or other documents required by the laws 
of the countries of destination, are payable by the pur- 
chaser and are not included in the seller's prices. If 
not otherwise arranged, the seller is authorised to pay 
same for purchaser's account, and add the cost to the in- 

Seller will take out consular documents as agent for 
the purchaser, who must state how the goods are to be 
declared, and, if the purchaser does not furnish the neces- 
sary instructions, seller will make declaration according 
to its best judgment, but will not in any case be respon- 
sible for any fines or other charges due to errors or in- 
correct declarations. 

Execution of 4-a. The seller shall not be liable for failure to per- 

Orders of form this contract in whole or in part, if such failure 

Shipment of is due to fires, strikes, disputes with workmen, war, civil 
Goods commotion, epidemics, floods, accidents, delays in trans- 

portation, shortage of cars or other causes beyond the 
reasonable control of the seller or of the manufacturer; 
nor shall these exemptions be limited or waived by any 
other terms of this contract whether printed or written; 
such contingencies shall not release the purchaser from 
his obligation to pay for the goods in accordance with 
the terms of sale. Provided, however, that in the event 
of such unavoidable delay the purchaser may, subject 
to previously obtaining the consent of the seller, cancel 
such portion of the goods already specified as is not 
manufactured nor in process of manufacture at the time 



and Shipping 



Damage in 


his request to cancel reaches the manufacturer's works. 
4-b. The seller may ship any portion of the goods 
as soon as completed at the manufacturer's plant, and 
payment for that portion of the goods shipped shall be- 
come due in accordance with the terms of payment herein 
specified. Insistence upon suspension of manufacture 
or suspension of any shipment if not acquiesced in by 
the seller may be treated by the seller as a wrongful 
termination of the contract on the part of the purchaser; 
and the purchaser shall thereupon be liable for all 
damages arising out of such termination. 

5. In the event of the purchaser failing to furnish 
complete specifications and instructions within the time 
specified in the contract, the seller shall be entitled, at its 
option, to cancel such portion of the contract as may 
remain unexecuted, or to make shipments in accordance 
with the specifications and instructions which the pur- 
chaser may have furnished for previous shipments oa 
account of the same or a previous contract. 

6. If the purchaser requires inspection, it must be 
made at manufacturer's plant, and such inspection and 
acceptance shall be final. Reasonable facilities will be 
afforded to inspectors representing the purchaser to in- 
spect material and to apply, previous to shipment from 
the manufacturer's plant, tests to which the seller ha^ 
previously agreed. 

7. Claims will be considered by the seller only when 
made promptly after receipt of the goods and due op- 
portunity has been given for investigation by seller's 
own representatives. No claims for labor nor involving 
consequential damages will be recognised. Goods must 
not be returned except by permission of seller. 

8. The seller agrees that the goods shall leave the 
manufacturer's plant in good condition, and the pur- 
chaser assumes all risks of rust or other damage during 

9. The goods are to be exported to the destination 
stated by the purchaser at the time the inquiry is made, 
and the purchaser guarantees that the goods will be 
shipped to tliat destination, and agrees to furnish, if re- 
quired bj-- the seller, a Landing Certificate duly signed 
by the Customs Authorities at the port of destination, 


certifying that the goods have been landed and entered 
at that port. 

The seller reserves the right, even after partial pay- 
ment on account of any contract with the purchaser, to 
require from the purchaser satisfactory security for the 
due performance of his obligations, and refusal to 
furnish such satisfactory security or tlie failure of the 
purchaser to execute any of his obligations under this 
or any other existing contract will entitle the seller upon 
notice to the purchaser, to suspend shipments or cancel 
the contract, or so much of it as may remain unexecuted, 
without prejudice to any claim for damages the seller 
may be entitled to make. 

10. Unless otherwise stated in quotation, seller's terms 
Terms are understood to be net cash in exchange for relative 

documents mentioned herein to be tendered to bankers 
approved by the seller with whom irrevocable credit is 
to be established when order is entered and before goods 
are manufactured. 

11. Every quotation is based on the understanding 
that, if accepted and the seller should elect, formal con- 
tract satisfactory to the seller will \)e signed by the 

6. The indent. — Suppose, now, that the sample and 
prices have been found satisfactory and an order has 
been placed. The manufacturer has secured the or- 
der either directly thru the foreign buyer, or else thru 
a middleman, generally a commission house. In the 
second case, the indent, or foreign order, may be 
either an open indent or a closed indent. A closed 
indent specifies the firms from which the goods are to 
be purchased, while the open indent leaves to the dis- 
cretion of the merchant or the commission house the 
choice of the source of supplies. 

A typical indent states the quantity and nature of 
the goods, the price (if it is known to the buyer), the 
firm from which the goods are to be obtained {if it is 


a closed indent) , the marks to be used on the packages 
and documents, the date of shipment or of arrival (if 
the order is urgent) and often the method of payment. 
The indent is numbered by the foreign buyer, and the 
number is usually included in the mark placed on the 
packages and documents. 

For example, if the indent is received by an export 
commission house, it usually takes the following 
course thru the various departments. After it has 
passed thru the mail-clerk's office in the commission 
house, it goes first to the credit man, who takes notice 
of the methods of payment and passes judgment in 
regard to the credit. If the order is satisfactory, it is 
passed on to the buyer, whose duty it is to learn the 
prices and then purchase the goods from the manufac- 
turer. The amount of freedom he will have in pur- 
chasing will depend on the nature of the indent. 
From the buyer the order passes to the bookkeeping- 
department; at this stage it is recorded on an index 
card. A copy goes to the shipping clerk; this copy 
enables him to follow up the shipment and attend to 
the receipt of goods at the seaboard, the arrangements 
for freight space and the making out of the ocean 
bill of lading. Finally, a copy is sent to the invoice 
clerk in order that he may make out the invoice, draw 
the draft and take out the insurance papers. From 
him the order passes to the correspondent, whose duty 
it is to write the letters which must accompany the 
various documents that go with the shipment. 

7. Standardizing the order. — As a rule, all indents, 


whether they are received by a commission house, a 
merchant or a manufacturer, must be put into a form 
which will make them suitable for the purposes of the 
business. If the order is in a foreign language that 
is not familiar to the majority of the clerical force, it 
has to be translated. If it is contained in a letter, it 
has to be put into the proper form, before it can be 
started on its route thru the various departments. 
In most cases, therefore, a special form is used for the 
original order. Several copies are made out, each 
copy on paper of a distinctive color. 

The first step, after the receipt of an order, is the 
acknowledging of it. The second step is to inform 
the various departments carefully about all details 
concerning the nature of the shipment — for example, 
order nimiber, marks to be placed on cases, the desti- 
nation and the kind of packing required. If one or- 
der requires the sending of several packages, each 
package is marked with the order number arid, in ad- 
dition, is given a serial letter that shows its relation to 
the rest of the shipment. 

The acceptance of the order should be acknowl- 
edged on a special blank and should include all the 
details of the order as given by the customer. It 
should also include clear statements in regard to ship- 
ping routes, manner of packing, amount and kind of 
marine insurance, consular declarations and similar 
details. If such statements are made, there is httle 
probability that the buyer will be disappointed in any 


8. Packing for export. — Special attention should 
be given to the packing of export goods. If specific 
instructions are given, they should be scrupulously 
followed. Even if the American or Canadian ship- 
per may not understand the reason for certain instruc- 
tions, and may be convinced that his idea of packing 
is better than that suggested by the foreign customer, 
he should nevertheless complj^ with the consignee's re- 
quest. In all cases, the peculiar conditions of the 
country to which the order is sent should be kept in 
mind. When, for instance, the goods have to be 
carried overland on pack animals, the size of the cases 
should be adapted to the carrying capacity of the 
pack animal which is used in the country of destina- 
tion. For example, a package that has to be carried 
by a native carrier should not weigh more than 90 
pounds. The load for a donkey should not exceed 
100 pounds. For a mule, the load is from 100 to 150 
pounds ; and for a camel, from 400 to 500 pounds. It 
should also be remembered that such packages should 
generally be divided into equal halves, so that half 
may be loaded on one side of the animal, and half on 
the other. 

Climatic conditions should be given due considera- 
tion. Seeds that have to cross the tropical zone must 
be protected against the heat and humidity that pre- 
vail in these regions. Also, careful attention should 
be given to the question of economy in the size of 
the packages, in order that the entire order may not 
occupy more space in the steamer than is absolutely 


necessary. In this connection it is important to re- 
member that the steamship company charges accord- 
ing either to weight or to measurement, choosing that 
standard according to which they can make the highest 
freight charge. 

The state of civilization obtaining in the country of 
destination, and the particular susceptibilities of the 
inhabitants must also be considered. Careful regard 
for these factors will often determine the color of the 
packing when goods are sent to a more or less unciv- 
ilized country, for certain color prejudices exist 
among primitive peoples which can seriously affect 
the salability of goods. In China, green and black 
are considered unlucky ; therefore these colors should 
not be used on packages sent to that country. There 
is a story of a German who captured the Chinese soap 
market by selling his soap in a yellow-dragon wrapper. 

The choice of the kind and color of the package 
depends also upon whether the goods are consigned to 
a wliolesale merchant, a retailer or an individual con- 
sumer. It should always be kept in mind, however, 
that attractive packing, careful boxing and artistic 
labeling will considerably increase the natural selling 
power of any merchandise ; in some cases, any one of 
these factors, or all of them combined, may influence a 
prospective customer to buy. Some of the European 
countries lay special stress upon good packing, and 
the reports of the consular officers of many commer- 
cial countries reveal again and again the effect that 
good packing has upon salability. Invariably, at- 


tractive packages have an important advertising value. 

9. Weights and measurements. — Another subject 
which calls for special attention on the part of the 
exporting manufacturer or merchant, is that which 
has to do with the exact statement of the weights and 
measurements of the exported goods. It should be 
kept in mind that in all countries, except in the Orient 
and in Great Britain and her colonies, weights arc 
expressed by means of the metric system. Of late, a 
special effort has been made to introduce this system 
more generally into this country. A report was re- 
cently prepared by the director of The Bureau of 
Standards in Washington, D. C, for the use of the 
International High Commission on the Uniformity of 
Laws. It might be a surprise to find how many large 
American exporters are already using the metric sys- 
tem, in some cases for both domestic and foreign 
trade. Now that the metric system has been adopted 
in Europe, Latin America and China, this country 
will find itself more and more at a disadvantage with 
respect to the units of weight and measure unless it 
also makes use of the same system. 

10. Marking the goods.— The question of how 
goods should be marked must be carefully taken into 
account if infraction of the "merchandise marks" laws 
is to be avoided. Some countries are extremely strict 
in this matter. In Australia, the Commonwealth 
Commerce Act provides that a trade description 
must be branded on certain goods or affixed by a label : 
this "description" indicates the country in which the 


goods were manufactured, and the materials of which 
they were made. In Australia, the most detailed 
regulations are issued, with reference to almost all 
classes of goods. In Sweden, it is not allowable to 
print on the goods any Swedish name unless there 
is also a clear statement of the country in which tlie 
g-oods originated. Any infringement of this rule, 
which is for the protection of the manufacturer, re- 
sults in the immediate confiscation of the entire ship- 
ment. These examples clearly show the importance 
of the manufacturer's being thoroly acquainted with 
the marking regulations of various countries with 
which he deals. 

In addition to knowing the regulations with respect 
to the marking required by the governments of the 
importing countries, the exporter should be very care- 
ful to inform himself in regard to all marking de- 
manded by the foreign customer. Generallj^ each 
package should bear the order number and the initials 
of the exporting firm within a diamond or triangle. 
In no case should the port mark, the mark that indi- 
cates the port to which the shipment is consigned, be 

11. hivoicing. — Finally the matter of invoicing 
must be thoroly understood. According to the kind 
of trading method employed and the nature of the 
price quoted, one of the following fonins of invoices 
is used: 

Loco Invoice; showing cost of goods at place of 


r. O. B, Invoice; showing values free on board 

C. & F. Invoice; showing cost of freight. 

C. I. F. Invoice; showing cost of freight and in- 

Franco-domicile Invoice; showing cost of freight 
when dehvered at the purchaser's warehouse, and in- 
cluding all charges to the port of destination, as well 
as import duties and transport charges from the port 
of discharge to the place of final destination, if that 
place is in the interior. 

The Franco-domicile invoice is similar to, some- 
times identical with, the "f. o. b. destination" invoice. 
The loco invoice is sometimes called an "f. o. b. fac- 
tory" invoice. 

The export invoice differs in several respects from 
the domestic invoice. For example, the former in- 
cludes code words, spaces for numbers, w^eight meas- 
urements, the foreign-money value of the total ship- 
ment and the signature of the shipper. For this rea- 
son, it is advisable to use for export invoices, forms 
that are different from those used in domestic trade. 
Additional details are required in the case of invoices 
used for special markets. Thus, for shipments to 
Australia, New Zealand or South Africa, the invoice 
should show the charges for the following items ; box- 
ing, crating, cartage from factory to railroad station, 
and the freight transportation from local station to 
the port of shipment. The laws of these countries 
require that these detailed statements be made, no 


matter how the manufacturer quotes his prices. The 
placing of the signature at the bottom of the export 
invoice is always desirable, often absolutely necessary. 
12. Sundry documents. — Besides the invoice, vari- 
ous documents have to be made out. There are the 
statement of charges, the memorandum of measure- 
ment and weight, and the paper that bears the ship- 
ping and financial advice. There are always some 
charges which have to be billed to foreign customers, 
and which are not included in the quoted price. These 
are enumerated in a special statement; it is better to 
make this statement on a special form rather than to 
write it on the face of the invoice itself. Such charges 
might include petties — for example, the cost of post- 
age and cablegrams, and charges for freight and extra 
packing — provided these are not included in the price 
quoted. The packing list — sometimes called the 
measurement notes — is of special interest in connec- 
tion with the steamship service, and is especially val- 
uable to importers when a shipment is made up of a 
large number of packages. Sometimes it is neces- 
sary to supply certificates of inspection, analysis, 
weight and count. These are most often used with 
shipments of oil, grain, lumber and similar commodi- 
ties. Certificates of this kind and the statement of 
charges are usually demanded by the banker who me- 
diates the payment for the shipment, which is gen- 
erally made by draft. When payment is made in this 
way, the shipper uses a special form to advise the for- 


eign customer that a draft has been drawn. This is 
known as the shipping and financial advice. 


What policies are to be recommended in regard to sending sam- 

Why does the price policy in exports differ from that in domes- 
tic trade ? 

Explain the difference between c. i. f. and f. o. b. shipments. 

Describe the indent or foreign order. 

What considerations should be followed in packing goods for 
foreign shipment ? 

How does the diversity of weights and measures operate to the 
disadvantage of the American exporter.^ 

What is the nature of tlie rules of foreign countries in regard 
to marking goods? 

Describe the invoice used in foreign trade. 



I. Inland transportation. — If the exporting manu- 
facturer is located in an inland city the consignment 
has to be moved to the seaboard, in most cases by rail. 
The part that each of the various agents plays in con- 
nection with the inland transportation of shipments 
in foreign trade, was discussed in the preceding chap- 
ter. In the present chapter, therefore, the question 
of agency is disregarded, and only the method of han- 
dling the shipment is considered. When a shipment 
from the interior is made, either a thru bill of lad- 
ing or a local railroad bill of lading is used. In the 
former case the local representative of the railroad 
company, its foreign freight agent, engages freight 
space and attends to all the details of the arrange- 
ment for ocean transportation. The local railroad bill 
of lading merely covers the transportation from the 
manufacturer's plant to the seaport. If the goods are 
shipped on this kind of bill of lading, the person whose 
duty it is to attend to the shipment at the seaboard is 
notified in regard to the time the shipment is due at 
the coast, and is expected to attend to sending it on 
without unreasonable delay. 

Bills of lading for goods shipped to foreign parts 

XV — 12 ] 59 


should be marked "For export." In case of carload 
shipment to New York, they should bear the direc- 
tions "For export, lighterage free." This specifica- 
tion insures for the shipment the special attention that 
railroads try to give export shipments, which includes 
free storage for fifteen days instead of for forty-eight 
hours. Their purpose in making these special allow- 
ances is to provide for delays in connections — such as 
the delay that occurs when goods fail to arrive in time 
for shipment on the right steamer. 

The carting from the railroad station to the ship's 
pier will often be arranged for by the railroad com- 
pany itself. In many cases, however, it will be more 
economical for the buyer to employ the services of a 
foreign-freight forwarder or of a carting company 
that handles goods for foreign shipment. It should 
not be forgotten that if a thru bill of lading is not 
used, the seaboard agent who is to take care of the 
shipment must be supplied with a copy of the railroad 
bill of lading, officiallj'- signed. A duplicate of the 
bill of lading is sometimes used as the shipping order. 
In such an event, the railroad keeps one copy for bill- 
ing purposes, and the shipper keeps another in his files 
as a memorandum. 

A new law concerning the railway bill of lading 
went into effect January 1, 1917. Under the pres- 
sure of the demand for a stricter regulation of the 
rules governing the use of bills of lading, from bank- 
ing houses, chambers of commerce, legal and indus- 
trial associations, farmers' councils and other organi- 


zations, Congress passed the Bill of Lading Act, 
known as the Pomerene Bill. This act renders the 
hill of lading more easily negotiable by transferring 
the liability for a fraudulent bill from the bank to the 

2. ''Straight" and "order" bills of lading.— The 
Bill of Lading Law discriminates between the 
"straight" bills of lading, which have to do with a 
shipment consigned to a specific person, and the "or- 
der" bill of lading, which is used with a shipment 
consigned to the order of a named person. Of these 
two types only the order bill is negotiable, and this is 
negotiable only if its negotiability is not nullified by 
a special clause. 

Only one of the conditions that appear on the back 
of the bill of lading needs special attention. This 
states that a claim relating to a lost shipment will be 
considered only if made in writing by either the ship- 
per or the consignee, and within four months after a 
reasonable time has been allowed for the value of the 
shipment to be estimated. If a claim is not filed 
within the specified time, the carrier cannot be held 
liable. A shipper, however, in order to protect him- 
self against loss, includes in his tracer a clause that 
automatically turns the tracer into a claim if the ship- 
ment is not received within a certain period. 

3. "Thru" bills of lading.— ''Thru'' railway bills of 
lading can be obtained to practically all European 
ports, and to some other ports of the world. In some 
cases, thru billing can be obtained from the American 


railroads to inland points in foreign countries. Gen- 
erally speaking, billing thru to inland points is not 
the most economical arrangement that can be made. 
As a matter of fact, few large importers at inland 
points in foreign countries are anxious to have ship- 
ments consigned to their domicile on thru bills of lad- 
ing. They usually prefer shipments c. i. f. foreign 
seaport, since they can make more profitable arrange- 
ments for the shipment of the goods from the foreign 
seaport inland than is offered by the American rail- 
road that quotes the thru-bill rate. 

4. Bills of lading in Canada. — The Canadian regu- 
lations in regard to bills of lading are to be found in 
the Bill of Lading Act, Revised Statutes of Canada 
(1906), Chapter 118; the Water- Carriage of Goods 
Act (1910) ; and the conditions in regard to uniform 
bills of lading approved by the Board of Railroad 
Commissioners, Order No. 7562 (1909). 

The same distinction is made between "straight" 
and "order" bills of lading, and only the latter are 
negotiable. There is also the same provision for deal- 
ing with claims, relating to lost shipments. But the 
Pomerene Bill goes much further in transferring the 
liability for a fraudulent bill from the bank to the 
common carrier. At the last annual meeting of the 
Canadian Bankers' Association, it was decided to 
bring before the Minister of Trade and Commerce a 
proposal to enact legislation in Canada on exactly the 
same lines. 

5. TJie ''London Clause" charge. — What seems to 


be a discrimination against Canadian seaports is the 
"London Clause" which forms part of all outgoing 
bills of lading issued by the North Atlantic shipping 
companies. It is an extra charge on all goods car- 
ried to the Port of London. The Port of London 
authority, contrary to the general impression, receives 
no part of this charge. It would seem that this clause 
should be eliminated if Canadian ti*ade is not to be re- 
stricted, especially as United States shippers had this 
same clause taken out of United States bills of lading 
in 1902. 

6. Ocean rates. — Ocean freight rates and chartering 
Avill be treated in special chapters in the latter part of 
this Text. Reference is made here to only a feAv 
technical details concerning the rates for foreign ship- 
ments. Tlie shipper should realize that there are tAvo 
kinds of ocean freight rates; they are either net or 
subject to a charge of five or ten per cent, which is 
known as ''primage." This charge originally repre- 
sented a gift made to the captain or the crew of a 
vessel for the careful loading and handling of a 
specific shipment. Later on, the same amount was 
given to shipping agents, also as a reward for taking 
special care of a shipment. And today it simply 
forms a part of one of the standard rates. Thus a 
rate of 50 shillings plus ten per cent is exactly the 
same as a rate of 55 shillings. But the practice of 
quoting primage is gi-adually waning, and it is prob- 
able that before long all rates will be quoted flat. 

7. Routine of making the shipment. — Even if the 


services of an agency of forwarders, commission 
houses or merchants are secured, the manufacturer 
or his export manager should be thoroly familiar with 
the routine followed in making the shipment, and 
acquainted with various formalities of the process, in 
order that he may check the work of those who repre- 
sent him. The following brief description may prove 
of some value to the reader. 

First of all, it is necessary for the shipper to engage 
freight room. If lie does this after he has made 
inquiry concerning rates for a specific shipment, it is 
considered that he has accepted the rate quotation 
made by the carrier. Nevertheless, the steamship 
company should be definitely informed on the ship- 
per's acceptance of terms, in order that definite 
provision may be made for taking the goods on board. 
Every effort should be made to have the shipment 
ready at the stated time, since otherwise the shipper 
will be charged for "dead space" without getting any 
value in return for the payment that he has made. 
Furthermore, delay means that the goods have to 
await the next steamer. Under such circumstances 
they may be held up for several weeks, and the buyer 
may suffer great inconvenience, if not actual loss. 

8. DocuTnents. — Various documents are used by 
the steamship companies in connection with the 
receipt of goods for shipment. The first one is a 
shipping permit (see page 165), by which the receiv- 
ing clerk at the steamsliip dock is authorized to receive 
from a given firm a specified amount of merchandise, 



tf-S S * Attention of shippers is called to 

2tn — Section 235 of the Criminal Code of 

"g g-^ the United States with regard to the 

o .• 2 To THE Receiving Clekk. shipment of explosives or other dan- 

•a S -^t^ gerous articles. 



^ H a 
o ^ S J 

.2-°-^ i- Receive from 

•^ o o 

2 "o!l To 6^ delivered 

S c — ^ 

t, ^-^ o It is understood that this engagement is on the condition that delivery 

o o 5 shall be made promptly at the time called for in this permit or space will 
5g °5 H not be reserved, and the steamer and its agents shall be absolved from 
S. ^ 2— any and all liability arising out of the issuance of or under this permit, 
"ocJ — ■'Sbi) including any liability that may arise on account of the steamer's pro- 
° o == ^ ci ceeding to sea without the goods. 


q New York, 19 Pee 

to be delivered at a certain time. A shipper will 
experience difficulty in getting his shipment on board 
the steamer without a shipping permit. The next 
document is the dock receipt (see following page) 
which merely signifies that a certain consignment has 
been received by the receiving clerk. This receipt is 
exchanged for the comj)any's bill of lading before the 
departure of the steamer by which the goods are sent ; 
the exchange takes place at the steamship company's 

The next documents to be considered are used in 
connection with the clearing of the goods thru the 
custom house. The steamship company is not per- 
mitted to issue the bills of lading until these papers 
are filled out satisfactorily. The United States gov- 
ernment, as well as almost all other governments, 




•* "1 

3J«M •««»J»Q»0 i» J»V) 

"J'lS t^M'il • 


a , 




' J| 








•-H >• 













requires for statistical uses a shipper's export declar- 
ation (see below), which states the name of the 
ship by which the goods are to be sent, the destination, 
the number of packages, the marks that are used on 
the packages, the kinds of goods and their value. 
The statement of these particulars is made under oath. 
Xo oath is required in connection with declarations for 
export by vessel if the total value of the shipment 
does not exceed $100. It is specifically provided that 
these declarations may be made by an authorized 
agent of the shipper. In the case of shipments from 
interior points for export on thru bills of lading, the 
declaration may be transmitted to the seaboard with 
the shipping papers. 



L THE SHXPPE& MT7ST PRBPA&S THIS EXPORT DEOLARATIOM aod nbseribe'to tho oath btton \ eostoau 
•fficer, aotarj, or other aathorlzed officer. Tbo deelaratioD must bo tigoed bj the shipper, bat the oath ma; be omitted oo aoj ahip* 
ofteot for exportatloD hj Teasel II the total valne of the items does not eic«ed $100 and on shipmesta regardless of value to Canada 
or Mexico hj «ar, vehicle, or hnj. If the declaiatioo la execnted by an agent for the shipper the authority must be in wrttmg on 
this declaration or other docnment filed ^th the Collector. The valaea and names of shippers may be omitted from the duplicate, 
bat mast always appear.on the original. The eri£:inal is for vae of customs officers and will be treated, as eoDfideatial and informa- 
tion not disclosed without written authority of the shipper or his agent. Export statistiea are compiled from these declarations 
and all data required en the prescribed form most be furnished. 

X DOHESTZa ARTICLES EXPORTED.— The raloe of all articles grcmt, prodaced, er manufactured in whole or part la 
the United States must be stated in the column of "U. S. Products." 

X rOREIQN ARTIOLl^S EXPORTED.— The value of articlea of foreign origin shipped out of the United State* in the 
same condition as imported must be suted in the column of "Foreign Products." If foreign articles are subjected to any process 
of manufacture or alteration in the United States they become United States products and must be reported as euch. Thos: Im- 
ported raw sugar refined in the United States should be reported a« a domestic product. 

4. THE VALT7B OF ARTICLES to ba stated ia the aelUag or invoice price or the actual cost or true market ralue at tha 
iimo and place of shipment for exportation. 

6. DESCRIPTION Of ARTICLES EXPORTED most be accurate and complete. General terms such as dry goods, gro- 
ceries, meats, machinery, miHinery, etc., will sot be accepted. In the ease of cheese the declaration must 9tat» whether filled or 
onfiUed, oleomargarine whether colored or oncolored, butt«r whether pure, aaulterated, or renovated. 

6. THE mRD 07 PACXAGES as bDXbs. barrels, etc, and the net weight exclusive of outer coverings, must be specified. 

7. TH£ TOTAL QUANTITY of each, article expressed in the oaual meaaure of pounds, yards, gallons, etc., must be state<f. 
Oomeetie spirits exported most b« stated in gallons of 50 per cent alcoholic atrength. 

8. THE COtTNTRT OF FINAL DESTINATION OF GOODS — that ia, the country to which goods are sold— nttst b« 
ahovm. Special care should be exercised to state the final destination of goods shipped through Canada to Europe, and of goods to 
ba transshipped in the United Kingdom, the Netherlands, Germany and France en route to other eouatriea. 

9. INSPECTION CERTIFICATES. — Process butter or batter adulterated or renovated most be accompanied by eertiflcata 
of purity Issued by the United States inspector of dairy prodacts. Certificate of inspection must be presented to the Collector fo» 
neat and meat food prodocts exported when required by tho regulations of the Department of Agriculture. 

10. EXPORT 5GREDTTLE B may ba obtained free of charge from. the Bureau of Foreign and Domestic Commerce, Depart*' 
Bank of Commerce, Wuhlngtoo, D. C, and will be of much assistance to exporters, 

U. SALE AND PRINTINQ OF BLANKS.- Shippers export declarations may be obtained from Collectors of Customs at tb» 
price of two for one cent or $5X0 per thousand. The export declarations may be printed by private parties providing they am^ 
fom strictly to the official foBLla width, wording, color, and arrangement 



L SHZPMEHTS FROM IKTERIOR POINTS FOR EXPORTATIOM.-If shipped on a through blU of ladln?, the ship- 
fter most prepare the original export declaration and attached carrier's, extract and delirer both fonns to the carrier to accom- 
pany the shipping pap<^rB to the port of exportation. If shipped on a local bill of lading, the doclaratios and extract may be 
attached thereto or mailed ecparately to the consignee at the seaboard. 

(a) If the shipper prefers, ho may place the original declaration, but cot the earner's extract, Id a sealed csvelope addressed 
to the Collector of Costoms with his name indorsed thereon and the fact of sealing -noted od the declaration and deliver it with the 
extract to the carrier. If goods are consigned to an agent at the seaboard 'for transshipment and eiportatiou the shipper may 
mail the declaration and extract properly prepared direct to the agent. 

(&) Upon arrival of the goods at the port of exportation, the c&rrier mcst immediately deliver the original dedaraUons, sealed 
«nd nnse&lcd, and the carrier's extracts to the CoUector of Customs who will retain the original aod certify the extract and retcrs 
it to the carrier, vessel, or party named to attend to erportation. 

2. EXPORTING VESSEL OR CARRIER.— Care shoald be exercised \a ree^viog goods destined for foreign eoustries or 
con-contiguous territories not accompanied by certified extracts or original declarations, as clearance niU not be granted nntil the 
export dedaratione have been filed with the Collector or bond given to prodnee the same. The certiBed extracts moat be attachct} 
to the vessel's manifest or car manifest or copy of waybill when presented for clearance. 

3. CZP0RTATI0N3 FROM SEABOARD OR BORDER FORTS.— The shipper at the eeabo&rd or border may deliver 
or mail the original declaration and extract to the Collector, who will retain the original end eertifr the extract and deliver Lt to 
the shipper, vessel, or party named to attend to exportation. 

4. SHIPPER'S DECLARATIONS AND EXTRACTS ARE NOT REQUIRED on withdrawals from teod^d w&rebooM 
for exportation or on any shipments under customs bond for exportation or for transportation and exportation. 

HENT AND EXPORTATION should be treated in the same manaer as shipments from interior points and the declaration 
and attached extract must accompany the coastwise manifest for delivery to the Collector at the port of transshipment and expor- 

€. BEFORE A CLEARANCE SHALL BE GRANTED FOR ANT VESSEL bound to a foreign port, the owners, ship- 
pers, or consignors of the cargo of such vessel shall deliver to the Collector manifests (or declarations) of the cargo of the parts 
thereof shipped by them respectively, and dball verify the same by oath. Such manifest (or declarations) shall specify the kinds, 
quantities, and values of the articles and the foreign port or country of destination. (See sec 4200, Rev. Stats., U. S.) 

If any vessel bound to a foreign port departs on her voyage irithoot delivering manifest and obtaiaing clearance, the master 
or other person tn charge shall be liable to a penalty of $500 for every such offense. tSeo sec. 4197, Rev. Stats., U. 8.) 

Similar provisions apply to exportations by rail, vehicle, ^r ferry. ^Sce sec 1, act March 3, 2893.) 

7, TO THE COLLECTOR: I hereby, authorize v. 

•ddreso -. - .to act as my agent for eoatoms purposes ia 

the exportation of the wi thin; described goods. Please deliver the certified duplicate accordingly. 


The exact details of the requirements in regard to 
the statements to be made before the custom-house 
officials, are given in a government publication called 
"Shippers' Export Declaration and Export Pro- 
cedure," which is one of the Treasury "decisions." 
This decision contains special provisions for goods 
shipped imder any form of customs bond for exporta- 
tion from, or in transit thru, the United States. 
Since the statistical data regarding such shipments 
can be obtained from the customs papers, no declara- 
tion is required for goods so shipped. 

Many American manufacturers fail to realize that 


certain advantages can be secured by making ship- 
ments of this kind in bond. This is true of products 
that are subject to inter-revenue taxes, as well as of 
l)roducts that are partly or wholly manufactured from 
imj^orted materials upon which duty has been paid. 
In order to increase the salability of such goods, the 
United States ^ grants to products, which are ex- 
ported in bond, exemption from internal revenue 
taxes, and allows a so-called "drawback" of 99 per 
cent of the duty paid on these manufactures, which 
consist partly or wholly of imported crude or semi- 
crude material. Beer, liquors and tobacco are typical 
products of this kind. It is true that the manufac- 
turer has to comply with a number of technicalities in 
order to secure the benefit of these allowances, but the 
drawback, or the tax exemption means either a direct 
addition to the profit of the manufacturer, or else a 
greater profit thru increased sales due to a price re- 
duction brought about by means of these facilities. 

9. Sieamsliip hill of lading. — Having fulfilled all 
tlie requirements of the customs authorities, the ex- 
porter can obtain the steamship bill of lading in ex- 
change for his dock receipt (see inserted illustra- 
tion). This bill of lading is a valuable document, 
because it conveys title to the goods. The Pomerene 
Act applies to ocean bills of lading with the same 
force as it does to railroad bills of lading. The bill 

1 There is a similar provision in the Canadian Customs Act (see "The 
Customs Tariff, 1907, Sect. 10, and Schedule B.— also later amendments). 
In most cases the drawback allowed is 99 per cent of the duty paid, but 
in some cases only 50 per cent, and in one case 65 per cent. 


of lading is drawn up on a special form supplied by 
the steamship company, and usually from three to 
eight copies are prepared, some of which are ne- 
gotiable. The negotiable copies are placed in the 
hands of the banker, who finances the shipment or 
attends to collecting payment. The banker must 
have a "full set" — that is, all the negotiable copies that 
have been issued. If there should be any other ne- 
gotiable copies those in the possession of the banker 
would become worthless, since the title to the goods 
may be transferred by means of a single negotiable 
copy. Each of the negotiable copies, therefore, con- 
tains a statement as to how manj'- bills of lading of 
the same kind and of the same date of issue have been 

The non-negotiable copies serve various purposes. 
For example, they are used for the records of the 
shipper and the steamship company, for the custom- 
er's information, and for fulfilling the requirements of 
foreign consulates. 

The bill of lading is generally made out directly in 
the name of a foreign consignee under the following 
circumstances: when the consignee has actualty paid 
cash, or has otherwise arranged for security or guar- 
antee before shipment of the goods ; or when the ship- 
ment is made on open account. 

The consignee himself negotiates the order bill of 
lading by his own indorsement if the bill is di-awn 
directly to his order. If, however, it is made out to 
the shipper, the latter's indorsement is necessary of 


course, before the bill can be passed to any other per- 
son. The indorsement can be made either to the or- 
der of a particular person or bank, or it can be made 
in blank. Altho one negotiable copy, properly in- 
dorsed, is sufficient to convey title to the goods, the en- 
tire set should be indorsed. 

There is no uniform stjde for ocean bills of lading. 
They vary according to the carrier that issues them, 
and according to the conditions and customs prevail- 
ing at the port of destination. Each steamship 
company specifies its own terms, which, however, are 
always made subject to change, owing to the sharp 
competition between the various lines. 

10. "Four and '"clean" bills of lading.— The differ- 
ence between the "foul" and the "clean" bill of lading 
will bear explanation. The former is issued when 
part of the shipment is found to be damaged in any 
way. It is decidedly to the shipper's interest to pack 
his goods in such a way that the issue of a foul bill of 
lading will be rendered impossible, for any reference 
to bad packing or damaged goods places a stain upon 
the document in the eyes of many foreign bankers, and 
may result in serious difficulties. 

In order to obtain a "clean" bill of lading, an ex- 
porter sometimes gives a "letter of indemnity." 
The letter is attached to that copy of the bill of lading 
which is kept by the shipping company for future 
reference, and is sent back to the exporter if any 
claims are made against the steamship company 
because of imperfections in the shipment. 


11. Consular invoices. — Finally, the governments 
of foreign countries require another group of docu- 
ments — the consular invoices and the certificates of 
origin. Practically all South American Republics 
demand that these papers accompany all imports of 
foreign goods. 

The Federal Trade Commission, realizing the 
importance of tariff laws and regulations in the 
development of American export trade, made a thoro 
investigation of tariffs and other trade regulations 
imposed by the governments of Brazil, Uruguay, 
Argentina, Chile, Bolivia and Peru. Their report, 
which was published in June, 1916, contains a wealth 
of reliable and detailed information. Many fac- 
similies are used to show various forms that are used 
for recording customs imports — for example, consular 
declarations, transfer documents and certificates of 
origin. No manufacturer who wishes to take part in 
a large way in the export trade with these countries, 
should fail to take advantage of the information thus 
made available. 

The following are some of the documents that for- 
eign consuls in America are authorized to give: the 
consular invoice proper, consular attestation of usual 
invoice or certification of invoice bill of lading, certifi- 
cate of origin, and non-dumping certificate. A con- 
sular invoice generally includes the same details as 
an ordinary commercial invoice made out in the 
language of the country of destination. The number 
of copies required varies from two to eight. This 


invoice contains a full description of the merchandise 
represented in the shipment. For example, the 
Brazilian consular invoice requires the following es- 
sential details : 

1. Name and nationality of carrying vessel. 

2. Port of shipment of merchandise. 

3. Port of destination of merchandise. 

4. Port of destination of merchandise, with option for 
. or in transit for 

5. Total value of invoice, including approximate freight 

6. Approximate freight and shipping charges. 

7. Rate of exchTange, premium or agio of currency of 
country whence goods are exported. 

8. Marks and numbers of packages. 

9. Quantity or number of packages. 

10. Class of packages. 

11. Specification of merchandise in accordance with 
Article XIII, Chapter IV, law No. 1,103 of November 21, 
1903, which provides that "goods nmy be described either 
in accordance with the official nomenclature accomj>anying 
these regulations ... or in accordance with commercial 
usage, but with separate specifications of each article accord- 
ing to its material." 

12. Gross weight of the package in kilograms. 

13. Gross weight of the merchandise. Par. 2, art. 20, 
*'Preliminary Dispositions of the Tariff." 

14. Other units of the tariff on which duties are based. 

15. Declared value of each item or article described, in- 
clusive of freight and charges. 

16. Country of origin of each article. 

As an illustration we give a Brazilian Consular In- 
voice as filled out in practice ( from Report of Federal 
Trade Commission) . 



Federal Trade Commission. 


|L bn fatlnitiZ2£lO 



<&0n*ViltCbe (Serai em ilvttpool. 


(Dularamct sclemHtmtHl* qut tomcf 

eu earregaJartt 

«r thifftn 

dot nurcadcriat mtnciotuuUu netla factura etmlidat Hot W tolunut 

*/ M* minlianAu tpuifU m Ota nmM, entaaud m 1*4 I ftcttf" 

indicttiot, a quat I exacta I verdaJeira a todot et tffeilot, \mio *jsas mercadonas 
mJicaltd, mkult u m ttt nifccU Mm tad uac/, Mt mtnkmdwi btme 

diilinadit ae perto i«._jA^<.4i3it/«J*JM4A do SraMit « eoitsignadat 

duhnid It Ot$ pari of \J 

cot Srtt 

...gHartnte* Ihs aulh*Hlieilf of th$ abov4. 

^gtnl4 do Exfortadcr 
Agnt tt Rxporttr 


fiof* e nacioHalidade do ndvio i Vila . 
. A'inw atJ nalwnality oj $atUng v**ut 

Jiomt t MacioHoiidad* do navia d vafor. 

Kami aid mlimaUly o/ ilumtr 

fcrle do emharque da mtnadoria 

Pert q/ ihipntnt of tht mtrchandist 

fcrlo do dttlino da mercadoria 
fitri oJ itilinalun oJ /A« mtrthaadiit 

<Porto do deslino da mercadoria __, 

Part #/ ddtlinatwn v/th4 mtrtkandias 

7'orlo do deslino da mercadoria ent transilo para 

Pvri cf duthatwH 0/ tkt mtri/iandue m tra^tuhr 

Valor lolal da /actura inclusive freU t dtspetas approximadas £.JJ^l^ri....\J . 

Tatat v»ht4 ej Ih* irvoice inctuttvt of oppraxittiauirtiftii and charfu> 

Frele e despetas approximadas £ JZ* 

Afiprosimato /rtigKt and tkififtn^ cftarfU 

^gio da moeda do paii dt precedtncia : 

BMttengt of tKt country mhtna ^forttd 

Otiirrajoet do Consul 
■XejaJise a frejenU /actun nSo dhitanU rteuMrtm'ta 
C3 espertaioru < dar a etpeeificacio da mercadoria- 
de cm/ormidado com a UUra K. da art. 13, i» 
Qeeretcjr. 1103, do SI dtJTovtmiro do 290S. 

ViS10.—ContuUd» OirtI d» Republlet dot Eitiios Unldoa do Bruit -em Urereool lu 

• LMWM.Mt 




XV— 13 


12. Certificates of origin. — Those governments 
whose tariff laws show discrimination in favor of goods 
sent from certain countries, require certificates of 
origin. The import duty on goods from the favored 
countries is comparatively small. In order, then, 
that discount may not be allowed on merchandise that 
is not entitled to it, a certificate of origin is required. 
In some cases the ordinary consular invoice covers all 
statements required for this purpose; under such 
circumstances, of course, it is unnecessary to issue a 
special certificate of origin. 

13. Other certificates; special regulations. — A cer- 
tificate of origin is sometimes temporarily required, in 
accordance with quarantine and "phyllopera" regu- 
lations, when any country or district is afflicted with a 
plague or an epidemic. The purpose of the require- 
ment is to enable the authorities at the port of destina- 
tion to tell by means of the certificate whether or not 
the goods come from a locality that is affected. 

Besides certificates of origin, certificates showing 
that the value declared in the invoice is accurate are 
required at times. 

In certain British possessions, the desire to guard 
against the "dumping" of foreign goods (resulting in 
underbidding) has led to the use of so-called "non- 
dumping" certificates. These are required in Aus- 
tralia, New Zealand, South Africa and Canada. A 
certificate of this kind reads somewhat as follows : 

I declare that the values which appear on the body of this 
invoice represent at the date of the invoice what would be 


the open market value of these goods if they were sold for 
home consumption in the United States, and that the dis- 
counts shown are the same as those granted on similar quan- 
tities sold for consumption in the United States. 

Canadian inspectors frequently visit American 
manufacturers who export to Canada, examine their 
books and compare the values given in the export 
declarations with the recorded prices that these 
exporters charge American buyers. 

Special regulations concerning the importation of 
food, drugs, arms and ammunition often exist, and 
full particulars in regard to such reflations should 
be obtained by manufacturers who export to countries 
where they are in force. Special regulations also 
govern the international sugar trade as a result of the 
Brussels Sugar Convention. 


State the advantages and disadvantages of export shipments 
from inland points on thru bills of lading, and of local bill of 
lading to port of departure. 

If the importer lives in an interior city is it best to ship on a 
thru bill of lading, to destination or to the most convenient port ? 

Describe the documents incident to shipping, the shipping per- 
mit, dock receipt and shipper's export declaration. 

What is a shipment in bond, and what are its advantages? 

Describe the steamship bill of lading. 

W^hat do consular invoices usually contain, how are they issued 
and what purpose do they serve ? 



1. Two stages of the war. — The recent history of 
the foreign trade of the United States is dominated 
by two facts ; the outbreak of the European War and 
the entrance of the United States into that war. We 
entered the war early in April, but it was not until 
months later that the whole weight of the new bur- 
den made itself felt. So it seems appropriate to base 
tlie discussion of the first period — when America's 
trade was neutral — upon the statistics of the first 
three years of the war, the fiscal years beginning July 
1, 1914, and ending June 30, 1917. As the chief of 
the Bureau of Foreign and Domestic Commerce says 
in his report for 1917: 

From the beginning of the war to the time of our entrance 
-nto it, the business of the American exporter and manufac- 
turer was to make the most of the new opportunities in the 
markets of non-belligerent countries, to take wise and needful 
steps in preparation for trade after the war, and to sell 
munitions and supplies to the belligerents. 

As we have seen in an earlier chapter, the trade 
expansion of the United States into non-belligerent 
countries was not only a matter of taking advantage 
of a golden opportunity, but a necessity growing out 
of the economic development of the country. It 
might seem that the war trade with Europe has elim- 



inated or, at least, lessened this necessity. But noth- 
ing is further from the truth. The war trade has 
resulted in an enormous growth of our manufactiu'ing 
capacit}'. This growth has not merely emphasized, 
but lias perhaps doubled the pressure of our indus- 
tries' need of foreign markets. When we therefore 
give ourselves up to the spell of the fabulous figures 
which our foreign trade has reached, it behooves us 
to remember that they impose an obligation on Amer- 
ican manufacturers and exporters to find new markets 
which will absorb the war trade when war will have 

2. Americas foreign trade in recent years. — The 
growth of America's foreign commerce for the last 
27 years, is shown in the following table : 


Total Trade Credit Balance 

1917 $9,050,000,000 $3,250,000,000 

1916 7,825,000,000 3,097,000,000 

1915 5,326,077,067 1,768,883,677 

1914 3,902,900,051 324.,348,049 

1913 4,276,614,772 691,421,812 

1912 4,217,291,048 581,144,938 

1911 3,624,885,906 560,167,586 

1910 3,429,163,055 303,354,753 

1909 3,203,719,369 252,677.921 

1908 2,869,209,534 636,461,360 

1907 3,346,596,025 500,256.385 

1906 3,118,745,006 477,741,862 

1905 2,805,135,345 447,846,245 

1900 2,307,095,827 648,796,399 

1895 1,626,529,483 23,190,789 

1890 1,680,900,274 34,104,822 


Growth since 1914 is by no means evenly distri- 
buted over the various parts of the world. It is 
largely a result of the war and so the conclusion is 
natural that Europe as the seat of the war shows by 
far the greatest gain over the pre-war period. The 
table on page 181 shows that out of a total excess of 
1917 exports over those of 1914 Europe took almost 
three-fifths. It is true that Asia gained more pro- 
portionately, but the absolute figures of its trade with 
America are so much smaller that it is hardly fair to 
compare the relative growth of the two groups. The 
other parts of the world showed less encouraging in- 
creases, especially the record of Australia and Africa 
is rather poor. (See table on page 181.) 

S. Trade with Europe. — Ein*ope is divided into 
two belligerent camps with a third group of neutral 
onlookers. With one group, the Central Powers, our 
trade has as a result of the Allies' blockade dwindled 
to practically nothing. Thus 15% of our foreign 
trade Avas lost, — a loss which at the early part of the 
war was rather bitterly felt by some of America's 
exporters and exporting producers, such as the cotton 
trade for instance. But this loss appears a mere trifle 
when compared with the colossal gains made in the 
trade with the other group of belligerents, the "Al- 
lies". In 1914 we had exported to these nations an 
aggregate of less than one billion dollars worth of 
goods. This amount grew steadily until in 1917 the 
enormous figure of $3,885,000,000 was reached. 

In the third group we find neither the dazzling fig- 




W ° 





c: rt 

c „ 


O o 



(S "3 













g "3 

o .«_> 

o o 

fcl "^ 







c! "3 

<jj ^ 

o o 



P^ ° 





? « 

Oj ^ 

o o 

u *^ 










c "3 

V 43 

O o 

(4 "^ 












-1 o 

to Ml 



o r 

o CO 




r-l (N 




O) 00 

1-; 05 




od in 

LO to 





CO to 




CO <o 

i-l (N 




+ + + + -f 4 


C5 m 

r-l O 




CO 00 

■*■ to 




<o iH 



-*_ 10 

to CO 




>o •* 

CJ <D 




M "O 

lO 08 




CO T-( 




T)( iH 


CJ O) 

CI M< 




oj <o 





to rH 


CO o 

CI to 




C> CO 

d od 





00 t~ 




Ol t- 

1-1 CJ 





to Cl 




CO -* 





-# rH 

C0_ U3 




r-i I- 

Oi •<*! 




t- t- 

OS tH 




05 ■* 





(35 •»t 




ci c- 

O -"ii 



to c 



in t- 

in Ml 




<d oc 

-* CO 





Cl rH 




"t- "" 

1-1 r-l 









• £ 











3 C 

) o « 





< a 

i < 




ures of the Allies' commerce, nor the abrupt changes 
which characterize the trade with the Central Powers. 
The proximity of the neutral nations and their rela- 
tion to the allied blockade has brought this trade into 
the focus of attention. The startling feature of this 
development is that four neutral countries adjacent 
to Germany gained just about as much as the Central 
Powers lost. These countries are Holland and Scan- 
dinavia whose imports from the United States we 
give in the table below; 

(Last Three Figures Omitted) 

Year ending 
June 30 Denmark Norway Sweden Netherlands 



$ 9,067 


















While inflated prices have aifected the reported 
values yet the increase deserves special attention. To 
assume that the increase has in its entirety accrued to 
the advantage of the Central Powers overlooks tlie 
fact that neutral countries formerly imported large 
amounts from those countries. Germany, before the 
war, supplied these neutrals with cotton goods, elec- 
tric appliances, etc. The war stopped that trade and 
thereby rendered it necessary for these countries to 
import raw cotton and copper, etc., in greater quan- 
tities. Some increases of the imports of food suj^plies 
are due to this shifting of international commerce, but 
the high food prices ruling in Germany and Austria 
undoubtedly induced the neutrals to supply the 


Central Powers with foodstuffs. What effect Amer- 
ica's entrance into the war had upon this feature of 
our European export trade will have to be discussed 

The table on page 185 shows the distribution of our 
European exports among the most important coun- 
tries and to the three groups : I. Central Rowers, II. 
Allies, III. Neutrals. 

4. Trade with other continents. — Next to Europe, 
South America has attracted most attention as an 
export field. It is true that our trade with Canada 
and other parts of North America has grown more 
rapidly than has our South American trade, but that 
growth is largely looked upon as the natural result 
of geographic proximity. On the other hand. South 
America is geographically as near to Europe as to 
America, and culturally nearer to the Old World than 
to the New. Therefore, any gain that was to be made 
here was an inroad into the competitor's field and thus 
an expansion of America's natural export field. The 
following figures tell the story of our success in this 


(Millions of Dollars) 

f 1906 75.2 

Peace <^ 1907 82.2 Average, 80.4 

[ 1908 83.6 

r 1909 76.6 

Peace <] 1910 93.2 Average, 92.9 

1911 108.9 


r 1912 132.37 

Peace < 1913 146.1 Average, 134.3 

[1914 124.5 

("1915 99.3 

War <^ 1916 108.2 Average, 179.0 

[1917 257.6 

Progress in exports to South America did not keep 
pace with the tremendous strides made by exports to 
Europe, and hence South America's share of the total 
fell from 6% in 1912 to 4.09% in 1917. 

5. Nature of American trade. — We have seen hoAv 
the war has affected the direction of our foreign trade. 
But different parts of the world have different needs. 
A change in direction of trade necessarily means also 
a change in the nature of the commodities which are 
traded. Official statistics divide exports and imports 
into groups according to the state in which the 
goods are: raw, finished and semi-finished; and ac- 
cording to the use to which they are put; foodstuffs 
and other goods. In this respect far-reaching changes 
have been wrought in the last four years. In 191 4< 
crude materials for use in manufacturing led with 
34% of the total, manufactures ready for consump- 
tion being a close second with 31.1%. This relation- 
ship appears completely transformed in the 1917 
records. Here we find that the first group, the crude 
materials, had dropped to 11.7% with an actual in- 
crease in values of $60,300,000, or 7.6% while the 
second group, finished manufactures, had risen to a 
place far above all other groups with 47.3% of the 

2 ■ 


O ^ he may safely get) with liberty to take any route which Owners or Captain ma 



;ner in and upon a following steamer. 


cfl o 

Cfl C ( 

eight (quality, quantity, gauge, contents, weight and value unknown), and to 

stood that, if Steamer discharges in Rotterdam, Goods engaged for Amster 

for Rotterdam are to be forwarded thence to Rotterdam, in all cases at 

\\ of Lading' is signed, and provided Canal Navigation is open, but Steams 

Goods to be delivered against payment of freight, primage and charg 

r I lall have liberty to sail with or without pilots; that the carrier shall have libe 
^^ "Jd. in case the steamer shall put into a port of refuge, or be prevented from an 
"Zx tiy other steamer; that the carrier shall not be liable for loss or damage occas 
O {J^ ymaster or crew; by enemies, pirates or robbers; by arrest and restraint of Pr 
P ajjft, or any latent defect in hull, machinery or appurtenances, or unseaworthi 
2; S cjwners have exercised due diligence to make the steamer seaworthy; by he^ 
a o ^cplosion of any of the goods, whether shipped with or without disclosure Oi \ 
f-i ka* for land damage; nor for the obliteration, errors, insufficiency or absencevof ^ 
caused by the prolongation of the voyage, and that the carrier shall not ae 
eneral Average according to York and Antwerp rules of 1890. If the owner « 
perly manned, equipped and supplied, it is hereby agreed that in c^&ypf dang 
tanagement of th,e steamer or from latent or other defects or unseaworthiness < 
y due diligence, the consignees or owners of the cargo shaJ ljio t be^e^mpt 
ecial charges incurred , but with the shipowner shall contribu;, 
ligence, latent or other defects or unseaworthiness. Ship^ 



n the ground to bring the ship afloat {including towa. 

ich the consignee and/or holders of the dills of lading " 
<e decided in the U. S. A. or in the Netherlands accotdx 
•therlands excluding any proceedings before fore 
Ipment is subject to all the terms and provisio 
193, and entitled "An Act relating to the ii^ga 
./or consignee of all risks directly oi/Tnimrect 

to avoid any such risks or danger <<ner*Qf 
;d or return to any other port conveni 

■- I T— 

ar or host 
cargo or pers 
await or m£ 

!j|g Holland -Americ a Line. 



ilii! NEW YORK 





?ijo 21-24 State Street,' New.York. 


Pjods engaged for 





These Goods are destined for: 

Ciargei . $ 


SM". 1-17 U 4 Co 'Koim 3. Ord, No. 17. 

Keceive^ mapMreptgoodc 

Holland-America Line 

to be traasDorted br the Steamablp 

J lying Id tbs port of NBW YORK. 

and bound for ROTTERDAM . (or as near thereto as sbe may safely eeO with liberty to take 
of the castDinary route, or faUlos sbipment by said steamer In and upon a following steaioer. 

e which Owners or Captain may deem 


?! l%ll 

shippers weight (quality, quantity. Kauge 

Baged for Rotterdam are to be fo 
le BUI of Ladings ia siened. and : 

if Steamer discharges at A.msterdam. g 


Rotterdam, Goods engaged for Amsterdam are to b 
3 thence to Rotterdam, in all cases at Shipper's Rls 
d Canal Navigation is open, but Steamship Company 

a delivered against \ 

to forward by Railroad) un' 
and charges Immediately on discharge of the goods, without ar 










w 1 
en -s 

o .2 

- t>^ 











1 2 



j2 <i 










^ tr 



1 .rH 


-w J-, 

1 1 

/.^ c 


1 1 

g § 


to t^ 

g s 


=^ t>. 




1 1 









Ot tH 


6 d 







r-i d 




05 M 


00 t-i 





to (J) 


■«*' d 




00 1-; 


T)< e<i 

-^ (N 






S s 


K K 


C 03 


00 to 00 

ci CO »*' >" 

CO CO CO ■^ to 

iH in N CO 

+ I ++ + 

CO en t, CO CO 

00' CO r^ CO d 

0-. c^ in m 00 

+ I + + + 
00 <D in CO <n 
w d d cj o 

CO CO m >n 

00 t-^ rH f^ d 

!N CO 1H -^ O 

■<* O O CO 

rH in to CO 5*) 

ri< d Tj< in d 

t^ 00 O t- C'l 

CO tH 00 to" o 

t- IN C-1 CI <0 

<-! to O IM 

•<* 00 CO 01 l> 
rH d CO cJ d 

in t- T)i 00 00 

t> d d T-* -"f 

CO c) to rH 00 

CO o "-I 

w to t- in r-l 

1-i c^ d 10 co' 

o e-) 00 eJ CI 

+ + 

+ + 

rH CI 

0> O! 

d •»(< 

0> CJ 

00 d 
CO cj 
oo_ o) 
cT CO 


d •>* 
05 to 

r-l r-l 
+ + 

05 CI 

06 d 
00 a. 
c»" co" 

+ + 

O) q 
00' d 

to o 

in CO 


CO c) 

T* d 

CI q 

d o 

to o 

CO 10 

d CO 

0> CO 

o> CO 
cf '^ 

CI o 
r-! d 

t- o 

T}i q 

1-i CO 

o> q 
ci d 
to o 

in q 

d "* 

CO «o 

Tjl CO 

erf m :i< ti M 

<u o fe s - 
t2i tz; M fi « 



total. That is, almost half of all our exports consists 
of raw materials. The gain amounted to $2,219,- 
000,000 or more than 300%. The details are cleariy 
seen in the table given on page 187. 

Naturally such large groups do not give us a very 
clear conception of what our exports really are. This 
is especially true of the largest item, that of manufac- 
tures. We have, therefore, compiled a list of those 
partly or wholly manufactured articles which play the 
most important part in our export trade today. For 
the sake of showing the growth over the pre-war years 
Ave give the figures for both 1914 and 1917. 

Articles and Classes: Twelve months ended June 30th 

191T 1914 

in million doUai-s 

Iron and steel manufactures 1,129.3 251.5 

Explosives 802.8 6.3 

Meat and dairy products 404.1 146.2 

Brass manufactures 383.3 7.5 

Copper and manufactures 322.3 146.4 

Mineral Oil refined 223.8 145.4 

Chemicals, dyes, etc 182.0 22.7 

Cars, autos, etc 166.5 51.7 

Cotton manufactures 136.3 51.5 

Breadstuifs 112.9 63.1 

Leather and manufactures 153.7 57.5 

6. Imports. — The values involved in our export 
trade are so large that our import trade tho also very 
big and growing rapidly makes less of an impression 
on us. Indeed its growth during the last three years 
has been much slower than that of the export trade, 
which grew four times as fast, 169% against 40.5%. 
This slow increase in the total, results largely from 





o ^ 

PS ^ 

W o 

Q ^ 

o .2 

5:! =:: 


CI 00 to o> 

L-j tH O •<* 

rH <M 00 O 

+ + + + + 

LT 00 O O in 

■^ LO t^ O "^ 

O) ■* r-l iH CO 

+ + 

(X> to " 

t-l I-l " 

c tS 



00 CO 







00 d 
o o 

CO q 

'. J5 

t^ ?. 

c3 .2 3 

ai >. 

s s 

si 5 

p O o as O 

C -^ t: ?„ «i 

t« fl 

.S> g 


the actual decrease of European imports. The Cen- 
tral Powers were almost completely shut off from 
the world trade and the others were too busy waging 
war to attend to the export trade. Thus Europe 
which in 1914 sent us almost half of our imports, 
47.3%, in 1917 sank to the rank of Asia — both con- 
tinents sending us 23% and allowed North America, 
that is Canada, Cuba, Mexico, etc., to pass it, with 
28.4%. North and South America and Asia, all in- 
creased by about the same amount, namely by $338,- 
700,000, $319,500,000, and $328,200,000 respectively. 
Remarkable also is our rapidly developing import 
trade with Africa. The table on page 189 gives ac- 
curate information about all these movements. 

From the shifting of oiu* main sources of imports 
from Europe to such countries as Mexico, Cuba, South 
and Central America and Asia we can draw fairly ex- 
act conclusions as to the changes which the nature of 
our im23orts had to undergo. Europe, especially the 
northwestern section is a busy workshop. It exports 
little but manufactured commodities. The other 
countries mentioned above on the other hand are 
natural supply sources for raw materials. So a shift 
from Europe to South America and Asia, etc., means 
a shift from manufactures to crude materials. Sta- 
tistics corroborate our assumption. In 1914 crude 
materials accounted for 33.4% of our imports, while 
partly or wholly manufactured articles together 
amounted to 40.6%. In 1917 the figures were re- 
versed, manufactures having dropped to 35% and 



^ ca 




tr* efl 

O - 


I + + + + + 

"-^ [~ in w N 05 

•n 00 0> 00 t» rt 

a> CO ^ ci <N ■* 

C-1 M CO O 

I ++ + + + 

i.T th ci e^ cc o 

o o c-i 1.0 ir:i d 

^ o ^ •-• to <o 

to t- lO c> 





























































































"* CO "-I t- M 't 

^ t^ to Tji in N 

a; 0) 

S £ 

S t 13 


^ o _ 

w ih; cB ■< o <; 

® 'f' — 


raw materials having risen to 41.7%. Manufactures 
ready for consumption lost 18.3%; raw materials 
gained 75.3%. 

7. Quantities and prices. — So far we have viewed 
the development of America's foreign trade from the 
standpoint of its dollar value only. Nothing has been 
said of the quantity, which is perhaps even more im- j 
portant than the increases and decreases of the total 
values. If the dollar were a stable measure like the 
yard stick it would be easy to deduct the movements 
of quantities from the movements of values. But the 
relation of value to volume or weight changes con- 
tinually. We commonly say that prices vary, or, to 
use economic language, the purchasing power of ^ 
money fluctuates. Therefore no discussion of trade 
whether domestic or foreign is ever complete which 
does not properly take price changes into considera- 
tion in connection with the totals of values given for 
trade movements. 

In analyzing foreign trade in wartime such a 
process is doubly necessary as the war brings with it 
an inflation of all values far greater than peace times 
ever witness. The advance of Bradstreet's index 
number during 1917 alone was 29% and the increase 
over August 1, 1914, reached 104%. That means 
that the purchasing power of the dollar at the close 
of 1917 was less than half of what it was before the 
war and only one-third of the low-water mark year 
of 1896. The yearly average does not show quite so 
big an advance but even there we find an advance of 


75% for 1917 over 1914, the figures being 15.6565 
and 8.9034 respectively. Professor Pierce, of the 
University of Iowa, who has made a careful analysis 
of the situation comes to the conclusion that the 
growth of our exports for the last three years is not 
166% as the value statistics lead us to believe, but less 
than 92%. Imports, instead of gaining 40% show an 
increase of but 1.3% which gives a rise of 50%, in 
all foreign trade, and not of 110% as the figures 
expressing growth in dollars indicate. The following 
is a list of export prices of some principal domestic 
articles exported by tlie United States for the last four 
years together with the increase of the 1917 price over 
the 1914 price, expressed in per cent. 



Increase 1917 
over 1914 
1914 1915 191fi 1917 ill per cent 

Wheat (bushel) $0,978 $1.62 $1.28 $ 2.58 161.4 

Wheat flour (bbl.) 4.69 7.30 5.73 9.52 103.0 

Bituminous coal (ton) 2.50 2.63 2.28 3.47 38.8 

Cotton (pound) 122 .093 .128 .185 51.7 

Bleached cloths (yard) 092 .067 .088 .109 18.5 

Colored cloths (vard) 067 .066 .088 .118 76.1 

Steel rails for railways (ton) . . 28.85 27.66 32.00 47.40 64.3 

Structural iron and steel (ten). 38.20 35.28 50.90 72.90 90.9 

Tin plates (lb.) 034 .031 .040 .068 100.0 

Wire (not barbed) (lb.) 020 .023 .033 .049 145.0 

Men's shoes (pr.) 2.38 2.80 2.73 3.42 43.7 

Women's shoes (pr.) 1.70 1.73 1.65 2.31 35.9 

Newsprint paper (lb.) 023 .025 .026 .04 73.9 

Wooden boards, deals and 

planks (M. ft.) 22.60 23.33 23.84 34.68 53.4 

Wood pulp (ton) 43.62* 42.05 48.20 104.67 139.8 

* July 

A few examples will further illustrate the impor- 
tant bearing of price movements upon the true under- 
standing of trade development. Sisal imports of 

XV— 14 


1917 valued at $25,900,000 as against $25,800,000 in 
1916 while the quantity imported in 1917 was but 
143,407 tons against 228,610 in 1916. Hides and 
skins show a total value in 1917 of $216,400,000 
against $158,900,000 in 1916, while the quantity im- 
ported shows an actual decline of 43.5 million pounds. 
The same is true of flaxseed, raw sugar and many 
other commodities. Mr. O. P. Austin in the Americas 
(September, 1917) shows that on 25 principal articles 
imported for use in manufacturing, and which con- 
stituted 75% of all imports of this class, the value 
reported in 1917, was $1,201,595,000, but that if they 
had been valued at 1914 prices the total would have 
been $903,008,000. 

8. America enters the war. — All these trade cur- 
rents were more or less vitally affected by America's 
entrance into the war. This changed the whole per- 
spective of American foreign trade. The trade with 
the Allies has reached unheard of proportions. Mili- 
tary importance is now attached to it, and this means 
that sustaining it or even intensifying it is looked upon 
as a part of national duty, as an act conducive to the 
safety of the republic and of democracy in general. 

At the same time our attitude toward neutrals had 
to undergo a corresponding change. As the Chief of 
the Bureau of Foreign and Domestic Commerce puts 
it: "Trade with them must now be conducted with a 
careful and patriotic deference to the successful prose- 
cution of the war." Maintenance as well as further 
expansion in our newly won markets must be made 


"with strict reference" to politics which govern all 
foreign relations, commercial and other. The ad- 
vantages of trade expansion are by necessity en- 
dangered as long as the very existence of the present 
order hangs in the balance. 

9. Government control of trade. — Thus govern- 
ment regulation of exports and imports is fast be- 
coming the most important factor in the foreign trade 
of this country. This government control of our for- 
eign trade, has recently been summarized as follows: 

Subject of Control 

Office in Charge 



War Trade Board 



U U (« 


Commerce to prevent enemy trade 

H <( u 


Ocean shipping 

Shipping Board 



Navy Department 


Inland transportation 

Director of Railways 


Manufacturing thru priority 

War Industry Board 

The purpose of this control is mainh'^ to prevent 
goods manufactured or produced in the United States 
from reaching the enemy directly or indirectly; 
further the assurance of sufficient importation of in- 
dispensable raw materials, the conservation of prod- 
ucts of the United States, the supply of which is 
limited, and finally the most efficient "usage of ocean 

Some of the far reaching control which the Presi- 
dent exercises over our foreign trade was granted to 
him by the Espionage Act of July 15th, a law whose 
name hardly implies that it gives the President power 
to prohibit the export of any commodity when in his 
judgment the public safetj^ demands it. Under this 


Act trade with the Scandinavian countries and with 
Holland and Switzerland has virtually been cut oiF, 
tho in the case of Switzerland special allowances have 
been made. Furthermore a great many articles, 
today numbered by the hundreds, have been put upon 
selected lists. Thus licenses are needed not only for 
all trading with the European neutrals adjacent to 
Germany, but also for all trading in certain commod- 
ities regardless of the destination of the consignment. 
The embargo against the European neutrals has as its 
chief aim the complete shutting off of all food ship- 
ments into Germany. Realizing that it controls the 
food supply of the world, and, together with Great 
Britain, the fuel supply also, the United States feels 
that it is in the position to enforce upon the neutrals 
any policy in regard to trade with Germany which it 
deems wise to adopt. So far satisfactory progress has 
been made in that direction, several of the neutrals 
having submitted to a careful rationing of whatever 
food supplies they are granted from this side of the 

10. How the exporter is affected. — 'We thus see 
that the life of the American exporter toda}^ is not 
exactly "a bed of roses." But the full story of his 
cares has not been told. The publication by the War 
Trade Board of the enemy trading list was another 
blow to an already weakened fighter. It somewhat 
remedied the confusion which had been brought into 
international trade by the various blacklists of the 
Allies, but did not remove restrictions. 

Added to all this is the serious menace which the 


censorship brings to American foreign trade. Cen- 
sorship is a two-edged sword ; it can do a great deal of 
good in detecting danger, but it can likewise do 
irreparable damage by thro^ving suspicion on the 
innocent, and by paralj'Tiing initiative. 

It is to be hoped that this countrj^ will succeed to 
the same extent as Great Britain has done in keeping 
alive its foreign trade relations and in strengthening 
its position. The enormous financial burden wliich the 
war is piling upon the shoulders of this nation makes a 
sound development of foreign trade still more impor- 
tant than it had become in the recent past. The great 
credit balances which the wonderful growth of our 
export trade has enabled us to pile up have already 
given us the means with which to pay our foreign 
debts and to assume the role of a creditor. They will 
have to continue if we are to be able to bear the 
financial strain of this war. Thus to economic con- 
siderations have been added those of international 
and government financing. 


What influences recently have dominated the foreign trade of 
the United States axid what effect have they had ? 

How has the United States offset its losses in trade wnth the 
Central Powers? 

Why has trade of the United States with Canada expanded 
raore rapidly than with South America ? Of what special value is 
South American trade to the United States ? 

^Vliat change has taken place in tlie import trade of the United 
States and what effect has it had ? 

Discuss quantities and prices as applied to foreign trade. 

What has been the effect upon foreign trade of the Espionage 






1. Freedom of the seas an international law. — The 
ocean is a highway free to all. Its vast extent allows 
everybody to use as much of it for transportation 
service as he wants without infringing upon the rights 
of any other person. This is the fundamental char- 
acteristic underlying the freedom of the seas — the 
condition under which shipping on the high seas, in 
time of peace and time of war, is carried on by all the 
nations of the world. 

The laws of nations, civil as well as international, 
have built many a wall in defense of this principle. 
Increasing safety upon the sea, granted to strong and 
weak alike, has been one of the proud records of 
advancing civilization. To be sure, coastwise ship- 
ping in many countries is still reserved to the ships 
of that country, as in the United States. But in 
general, the principle of equal treatment to all has 
been brought to a wider application in ocean naviga- 
tion than in any other field of human activities. 



At one time the Spanish were supreme upon the seas, 
later the Dutch. Today the English claim that 
supremacy. The doctrine that one nation can cede 
a portion of the seas to another, upheld as recently as 
the eighteenth century by so eminent a man as Mon- 
tesquieu, has become utterly irreconcilable with the 
views of our jui'ists. 

Thus the phrase, the freedom of the seas, has 
almost the force of an axiom in time of peace. Great 
steps have been taken toward extending the guar- 
antees of unmolested international trade, even into 
the times of war. The Declaration of I^ondon of 
1909, reflecting as it does the opinion of the most 
enlightened men of aU nations in the fields of juris- 
prudence and diplomacy, was a milestone in the 
development of the freedom of the sea in time of war. 
The fact that this declaration of twentieth century 
sea-rights, was never ratified detracts nothing from 
its value as an encouraging omen. It marks a 
tendency in the evolution of modern practice to regard 
the peaceful rights of neutral nations as superior to 
the claims of a belligerent to treat commerce upon the 
seas as it chooses. 

2. British statement at the Hague conference. — 
This tendency is more clearly revealed in the charge 
of Sir Edward Grey to the British delegates before 
the Second Conference of The Hague, than in any 
other existing documents. This reads in part : 

His Majesty's Government recognize to the full the de- 
sirability of freeing neutral commerce to the utmost extent 


possible from interference by belligerent powers, and they 
arc ready and willing, for their part, in lieu of endeavoring 
to frame new and more satisfactory rules for the prevention 
of contraband trade in the future, to advance in the prin- 
ciple of contraband of war altogether, thus allowing the over- 
sea trade in neutral vessels between belligerents on the one 
hand and neutrals on the other to continue during war with- 
out any restrictions, subject only to exclusion by blockade 
from an enemy's port. They are convinced that not only 
the interest of Great Britain, but the common interest of 
all nations will be found, on an unbiased examination of the 
subject, to be served by the adoption of the course sug- 

In the event of the proposal not being favorably received, 
an endeavor should be made to frame a list of the articles 
that are to be regarded as contraband. Your efforts should 
then be directed to restricting that definition within the nar- 
rowest possible limits and upon lines which have the point of 
practical extinction as their ultimate aim. 

If a definite list of contrabands cannot be secured, you 
should support and, if necessary, propose regulations in- 
tended to insure that nations shall publish, during peace, the 
list of articles they will regard as contraband during war, 
and that no change shall be made in the list at the outbreak 
of or during hostilities. 

A list might be prepared and submitted for adoption by 
the conference, specifying the articles which in no event shall 
fall within the enumeration of contraband ; that is, mails, 
foodstuflTs destined for places other than beleaguered fort- 
resses and any raw materials required for the purposes of 
peaceful industr}^ It is essential to the interest of Great 
Britain that every effective measure necessary to protect the 
importation of food supplies and raw materials for peaceful 
industries should be accompanied by all the sanctions which 
the law of nations can supply. 

His Majesty would further be glad to see the right of 
search limited in every practicable way, e.g., by the adoption 
of a system of consular certificates declaring the absence of 


contraband from the cargo and by the exemption of passen- 
ger and mail steamers upon defined routes, etc. 

3. Interest of the United States. — All thru the dip- 
lomatic history of the nineteenth century, the United 
States has stood for the principle of the immunity of 
private property at sea in wartime. The interference 
of the European war with our exports not only to 
Germany, but to the neutral countries of Europe, 
gave us grave cause to be anxious lest over-sea nations 
attempt to restrict their dej^endence upon necessary 
supplies from the United States. Such a tendency 
would be a backward step in the progress of civil- 
ization and would be a severe blow to that expansion 
of our export trade for which we most earnestly 

4. Freedom of the seas and economic law. — The 
freedom of the seas is not only a political issue and a 
principle of international law, but it is also an econo- 
mic concept, fundamental to the understanding of 
ocean shipping. The same abundance which renders 
it impracticable for one nation to appropriate all or 
even parts of the sea to its exclusive possession, also 
guarantees a greater freedom to the individual sea- 
farer than prevails in any other field of business. In 
contrast to land transportation, water transportation 
is surprisingly free. 

This is strikingly illustrated by an article, "Agree- 
ments and Conferences in Their Relation to Ocean 
Rates," written by Mr. William Boyd, President of 
Houlder, Weir and Boyd, Incorporated. He points 


out the principal difference existing between rail and 
water transportation : 

Railroads obtain their franchise from the state, which 
permits them to lay their tracks along the lines of existing 
or potential trade centers, and to acquire rights of way by 
the exercise of eminent domain. Without these privileges, 
a railroad cannot be built. A road which is built in the ex- 
ercise of such a franchise becomes in duty bound to maintain 
a regular, continuous service, as efficient as the needs of the 
trade along the line require and the rewards of the business 
will permit. It is but just that companies thus organized, 
enjoying property rights acquired often at the expense of 
the state, and operating by virtue of special privileges, should 
be held to the performance of functions for which they were 
created, and should not so use their privileges as to cause 
prejudice to the public. They are public utilities and must 
expect public regulation. 

The conditions under which transportation by sea is con- 
ducted are totally different. The ocean trade, except for 
restricted coastwise trades in some countries, is free to all 
comers. Ships are not fixtures and are not constrained to 
any fixed line or route. They owe no duty to the state to 
maintain a service or to serve the public. Their enterprises 
are of a private nature. They may come and go by what- 
ever route or in whatever direction they please. Their only 
incentive to engage in any particular trade is to develop such 
trade to such a point that it will yield a profit which will 
justify regular and continuous service. 

5. Reaso7is for difference hetween land and tcater 
transportation. — This basic difference between trans- 
portation by land and by water lies in the fact that in 
the case of the former the roadway has to be prepared 
or even created by the expenditure of huge sums. 
The ocean, on the contrary, requires no such invest- 


ment in order to become suitable for the purposes of 
transportation. It is there, ready to carry all the 
vessels that are willing to intrust themselves to it. A 
man who wishes to send a cargo of wheat from New 
York to Liverpool merely charters a vessel or engages 
berth space on a liner. But before the wheat can 
travel from Chicago to New York, years of labor must 
have been spent, and millions of dollars must have 
been invested in constructing a railroad. 

This difference in the capital outlay necessary for 
an effective entrance in the transportation business 
on land or water means two things. The capital 
needed to construct the railroad with all its termini, 
branch lines, equipment and stations, would not be 
invested without the protection granted by the 
franchise. This franchise, however, means a serious 
limitation on the freedom of operation on the part 
of the railroad. The second result of the high cost 
of constructing a railroad is the quasi-monopoly 
resulting from the high cost of redupHcation which 
keeps outsiders out. No franchise is needed to sail 
the seas, and the possibility of outsiders entering the 
field of any existing steamship line is almost 
unlimited. That is the economic meaning of the 
freedom of the sea. 

6. Guarantees of the freedom of the sea. — A con- 
trary view to that just stated seems to be expressed 
in the following paragraph of the majority report of 
the Special Committee on the Merchant Marine of the 
Chamber of Commerce of the United States, in 1914: 


The ocean lanes are no longer free, trade routes being laid 
out with as much precision as our great railroad trunk lines, 
and traversed with almost the same regularity. The line or 
lines operating are as jealous of their field of influence and 
resent intruders with as much spirit as do our corporations 
controlling inland means of communication. Hundreds of 
agreements exist for protection and to exclude the new- 
comers, profits or losses are pooled, the number of yearly 
sailings by each line is apportioned and ports of discharge 

The facts enumerated in this statement are all true, 
but it is difficult to concur in its conclusions. Liners 
form but a fraction of the world's shipping, whose 
major part consists of the uncontrollable elements 
known as tramps. Their mere existence is a guaran- 
tee assuring the shipper against the abolition of the 
much cherished freedom of the sea. 

Equally important with a thoro understanding of 
these distinctions between sea and land transporta- 
tion, is an exact knowledge of the common terms of 
ocean shipping. Ocean tonnage is the most impor- 
tant of these terms and, therefore, should be the first 
to be explained. 

7. Tonnage definitions and tonnage ratios. — In 
maritime language there are two kinds of tons — 
vessel tons and cargo tons. 

There are three general methods of measuring a 
ship and four terms given to the tonnage ascertained. 
The methods are : 

1. By displacement tonnage, expressed in displace- 
ment tons 


2. By dead weight tonnage, expressed in dead 
weight tons 

3. By registered tonnage, expressed as gross tons 
and as net tons. 

The displacement tonnage of a vessel gives the 
weight of the volume of water displaced by the ship 
when fully loaded or "down to her marks." The use 
of the term "displacement tons" is, in general, applied 
to the war vessels of various nations of the world. 
These vessels carry no cargo and since the other 
methods of measuring have a special bearing on cargo 
and passenger boats, it is fitting that the method of 
measuring by displacement tons should be applied to 
the vessels of war. They carry neither cargo nor 

Dead- weight tons are the weight tons (2240 pounds 
in the United States, Canada and England; 2204 
pounds in other European countries) of fuel, cargo, 
passengers, etc., which a vessel can carry. It is the 
vessel's dead-weight capability, its carrying power. 
It is evident that this measure cannot be employed as 
the universal basis on which the tolls and expenses at 
various ports should be levied, since the amount of 
weight a large passenger vessel could carry, would not 
be at all commensurate with her size. In short, dis- 
placement tonnage includes the weight of a ship and 
all on board ; dead-weight tonnage, the weight of the 
cargo which the vessel can carry. 

8. First proposals of a uniform method of measur- 
ing vessels. — In the earlier days of commerce, con- 


tinual friction occurred on account of the lack of an 
adequate method of measuring vessels, a measure 
which would cover the requirements of all commercial 
vessels and, at the same time, be uniform thruout the 
world. Such a method was first proposed in 1837 by 
M. M. Martin, secretary of the Department of Public 
Works, Agriculture and Commerce of France. The 
system at present in force thruout the world, the 
Moorsom, was adopted by the United States in 1864. 
It was a method devised by an EngHshman of that 
name. This system, altho employing the term "tons" 
does not imply thereby the accepted meaning of the 
word, namely, weight. It means units of 100 cubic 
feet each. It is used to determine the space within a 
merchant vessel, in units of 100 cubic feet called 
"registered tons," which it contains. 

9. Moorsom system, — The tonnage deck of a vessel, 
having three or more decks, is the second deck from 
below. On a vessel with one or two decks, the upper 
deck is the tonnage deck. The length, depth and 
breadth of the space under the tonnage deck are 
measured, and the product of these dimensions gives 
the cubical contents. In a similar manner, the cubical 
contents of the decks above the tonnage deck are 
ascertained, and the sum of these products gives the 
cubical contents of the hull of the ship. On the upper 
deck are various appurtenances and inclosures. The 
cubical contents of these inclosures — namely, the fore- 
castle, chart-house, round-houses, excess hatchways, 
bridge and poop — are determined and added to the 

XV— 15 


former total, and this result is the gi'oss registered ton- 
nage of the vessel. The rules concerning the spaces 
that shall be included in gross tonnage vary with dif- 
ferent countries. Thus a ship would not have the 
same gross tonnage under the rules of Great Britain 
as under those of the United States. 

Not all the cubical capacit}^ of a ship is available 
for passengers and cargo. Crews' quarters, masters' 
quarters, officers' quarters, chart-room and stores have 
no earning power. To ascertain the net tonnage, the 
cubical contents of these inclosures and quarters must 
be deducted from the gross tonnage. Were the gross 
tonnage the only tonnage, and the tonnage on which 
all taxes, port charges, canal tolls, etc., were levied, 
there would be an unfortunate tendency on the part 
of owners to make the crew quarters as small as possi- 
ble. Therefore, nearly all great maritime nations 
provide that taxes, with due exceptions, shall not be 
collected on the gross tonnage. In sailing vessels, the 
non-earning capacit}^ which corresponds to the engine 
room and bunkers are the lockers where the sails are 

Generally speaking, the net register tonnage is 
somewhat less than two-thirds of the gross register, in 
the case of an up-to-date freight steamer. In the case 
of the high-speed passenger vessels, the net register 
tonnage may be less than half, sometimes not more 
than one-third of the gross register. It may be given 
as a rough rule that the dead-weight capacity of a 


vessel is from 234 to 2% times the net register 

10. Freight charges and kinds of tons. — The appli- 
cation of these kinds of tons to the actual business of 
shipping must be considered. The cargo ton is of two 
classes: weight and measurement. In ocean com- 
merce, the metric system of weight measure, which in- 
cludes the meti'ic ton of 2,204.68 pounds, is more gen- 
erally used than the English system with its long-ton 
of 2,240 pounds, which also prevails in the United 
States and Canada. In American railroad traffic and 
on inland waterways the short-ton of 2,000 pounds is 
used almost exclusively. 

If a shipment "measures more than it weighs," 
that is, if its weight is less than 56 pounds to the cubic 
foot, the freight will be based upon the measurement 
ton, which is equal to 40 cubic feet. The figure 5Q is 
ascertained by dividing 2,240 — number of pounds in 
long ton — by 40 — the number of cubic feet in meas- 
urement ton. The steamship company charges by 
weight or measurement, whichever way it gets the 
larger revenue. Grain, minerals and some other sim- 
ilar products move regularly by weight; but manufac- 
tures, general merchandise, and, in fact, most kinds of 
ocean freight are taken at "ship's option," weight or 
measurement. The option which is taken is ordi- 
narily measurement, since comparatively few com- 
modities weigh more than they measure. The reason 
wh^'^ the measurement ton has tlie size of fort}'^ cubic 


feet is due simply to the fact that a weight ton of Rus- 
sian wheat occupies forty cubic feet. This explana- 
tion seems plausible when we consider that wheat has 
long been the greatest staple of ocean commerce and 
that Russia represents its chief source. 

11. Computing net tonnage from gross tonnage. — 
It has been remarked that there are different methods 
of computing net tonnage from gross tonnage. The 
fact that the American method of measuring tonnage 
results in a considerably higher ratio of net to gross, 
than under the British method, is often cited as one of 
the obstacles to the building up of an American mer- 
chant marine. Port charges, tonnage dues and any 
other charges such as canal tolls are levied upon net 
register tonnage. For example, Captain Robert Dol- 
lar in the Pacific Marine Review of August, 1913, 
complained that his steamer Hazel Dollar measures 
2,800 net tons by British measurement and 3,582 by 
American, which amounted to 779 net tons more than 
tlie British registry would give him. Much of the 
force of this argument is lost, however, when it is re- 
called that most American vessels in the foreign trade 
possess the necessary papers to show their registered 
tonnage according to both British and American 
measurements so that they can avail themselves of 
either, as convenience demands. 

Also in regard to dead-weight capacity, superiority 
over the American regulations is claimed for the 
British rules. All British steamers ^ have a load line 

1 This applies also to Canadian vessels. 


painted on the outside of the ship to indicate the depth 
to which the ship may be loaded without possible 
danger to life and property. This is known as the 
Plimsoll line. The scale of feet pamted on an Amer- 
ican vessel does not offer the same guarantee. As 
more vessels engage in oversea trade, the desirability 
of this Plimsoll line will probably be more generally 

12. Cargo space and dead-weight capacity. — In 
order to use the cargo space of a vessel to the greatest 
possible advantage, discrimination is called for in the 
mixing and stowing of measurements and weight 
cargo. There are few commodities which, when used 
alone, assure an economical loading of the ship. 
WHieat comes as close to the ideal as almost any other 
commodity. In the case of pig iron, the dead-weight 
capacity of the ship will be reached v/hen four-tenths 
of the cargo space is still empty. On the other hand, 
a cargo of cotton will completely fill the available 
space without utilizing the ship's dead-weight ca- 
pacity. We find that even in the case of a steamer 
which takes lumber across the ocean, careful selec- 
tion of various classes of wood is made in order to 
assure the most profitable and complete loading of the 
vessel. Frequently cotton is added to fill space, and 
a deck-load of timber or logs is used to complete the 
cargo. In the chapter on freight rates, we shall ex- 
plain how liners, by means of their freight rate policy, 
influence the type of cargo that is forwarded to them 
for shipment. 


13. Ship inspection and registration, — All ships 
flying the American flag are listed by the United 
States government.^ Their machinery, life-boats, 
boiler and the whole equipment are inspected an- 
nually by an inspector connected with the Bureau of 
Navigation of the Department of Commerce. In ad- 
dition to this government inspection, plans and speci- 
fications prepared for the construction of vessels are 
passed and and approved by private institutions whose 
main business is marine insurance ; such as the famous 
Lloyds, Bureau Veritas and the American Bureau of 
Shipping. They also watch every step in building, 
and test the materials used. On the basis of these 
observations, the vessel is rated. This rating forms 
the basis upon which insurance companies accept and 
assess risks on hulls. When all conditions imposed 
upon ship-builders and ship-owners are complied with, 
our government "registers" the vessel if it is to engage 
in foreign trade. Vessels emj)loyed in coastwise and 
inland trade are "enrolled." The certificate of regis- 
tration is to a vessel what citizen papers are to the indi- 
vidual. They entitle the ship to the protection of the 
government whose flag it flies and to the enjoyment of 
all the privileges guaranteed by international law or 
special treaties. In case of war or international com- 
plications, the vessel often procures a passport or "sea- 

Numerous documents called ship papers must be 

^ Similar provisions for the inspection and registration of vessel.s de- 
sirous of being entered on the Canadian registry are enumerated in 
detail in the Canada Shipping Act. 




IT. B. PVBue BxAiTB BCEnc«, 
Fon& 1S«4. 











PoH of^ 

Vessel: . 

Bound from to 

J^umber of eases of and deaths from the foUowin^-nam,ed diseases reported during the 
two weeks ending-.^ : , 191 


KiniEER op 


CAny ooDditioa affecttoe th* public ha^th «ilsUng tn tbs port lo b* ' 

Cholera, Asiatic i, 


TS[T)hoid Fever 

Typhus Feyer „ 

Yellow Fever 

Vessel last fumigated at . 

Given under my hand and teal thit. 

■ ^ay of.. 


Sarjeon, V. S. Puilic BeaUh Service. 

executed before a ship may enter or clear from a port. 
For example, no vessel from a foreign port can enter 
a port of the United States without a clean bill of 




(SecCloa ISOI, BavUed SCMaC«w 



['Shcsc arc ta certifg bU totiom it datb^conccniT, 

; Master or Commander of the 

'burden Tons, or thereabouts, mounted with. 

; Guns, navigated with lifen. — 

built and bound for 

having on board . 

meirchandise: and stores. 

^hath here entered and cleared his said vessel, according to taw. 

. 6IVEH under our hands and seals, at the Cusfom-House of the Port of New Torlt. this . 

day e/_ one thousand nine hundred and . 

and in the year of the Independence of the United Stales of America. 

Daptily Kmal OlJictr. 


health. If a steamer is to leave Hongkong for San 
Francisco it must, before departure, secirre from the 
American Consul at Hongkong a document which 
states that the vessel is free from contagious diseases. 
If a contagious case is known of in the port of 
departure, that fact is noted on the bill of health. 
When the vessel enters San Francisco, this paper is 
given to the quarantine officers, who are the first to 
board the ship upon its arrival. Only after the most 
careful scrutiny of this paper, and a thoro examina- 
tion of passengers and crew, is the vessel granted 
entry. Permission to enter is outwardly indicated by 
lowering the yellow flag which is flown from the fere- 
mast while the ship is passing inspection. 

When a vessel leaves the United States or Canada 
for a foreign port it must take a "port sanitary state- 
ment"; a revised form of the bill of health. It must 
also be provided with clearance papers. In the latter 
the language gives evidence that the form was pre- 
pared many years ago. Illustrations of these docu- 
ments are given on pages 213 and 214. 

14. Regulations governing the manifest. — The 
next authority to be satisfied by the entering vessel 
are the officials of the Customs House service. They 
inspect the list of passengers and the list of stores. 
The list of passengers serves in the preparation of 
statistics, showing the emigration and immigration, 
and in a minor way for the purpose of detecting crim- 
inals and undesirable aliens. Tlie list of stores is 


intended to separate the cargo from the provisions 
left after the voyage. The most important document 
is the manifest. This is a declaration of the entire 
cargo, a summary of all the bills of lading. 


What is the significance of the phrase "freedom of the seas" 
in international law^ and wliat is its economic interpretation ? 

What are the fundamental differences between land and water 
transportation ? 

State the different meanings of the word tonnage. 

How is net tonnage distinguished from gross tonnage ? 

How is freight charged? State the rule for using the weight 
ton or measurement ton. 

Why are mixed cargoes desirable? 

Describe a bill of health. 



1. Ship development. — On land the railroad repre- 
sents the unit of transportation, on the ocean it is the 
ship. Just as the raih'oad equipment, particularly the 
locomotive, during the last century passed thru vari- 
ous stages of a remarkable development, the ocean 
carrier underwent many changes. The ship of today 
is sixty times bigger and many times faster than it;s 
prototype of George Washington's time. On the 
even basis of ton for ton, the shipping of the present 
is five or six times as efficient as that in the early days 
of this nation. This is the result of the substitution of 
steam and oil for sails as motive power, and of iron 
and steel for wood as material of construction. 
When we compare the leviathans of today, with their 
gross register tonnage of 50,000 tons, with the 400 ton 
ships that were the pride of Salem a century ago, we 
must indeed marvel at the progress of mankind upon 
the sea. 

From the viewpoint of engineering, the size of the 
vessel is limited only by the depth of the channel 
traversed and the draft permissible at the termini, not 
by difficulties inherent in the construction of the vessel 
or its operation. The Suez Canal, because of its hm- 



ited dimensions does not allow the passage of any ship 
of more than 8.53 meters draft, 22.86 meters width 
and 170.86 meters length, thereby restricting the en- 
tire tonnage available for the trade with the Orient to 
a maximum which begins to prove burdensome. The 
time will come when the Panama Canal also, in spite 
of the gigantic dimensions of its lock constructions, 
will be a check upon the natural development of ship- 
building in regard to the size of vessels using it. It 
will be recalled with what difficulty New York 
obtained from the War Department permission to 
extend its pier head lines in order to care for the Olym- 
pic and Imperator. 

2. Causes of growth. — The enlargement of ships 
was rendered profitable by the vast increase in the vol- 
ume of trade during the last century. The growth was 
stimulated by the keen competition existing among 
rival steamship lines, which only in recent years came 
to satisfactory agreements with each other. The 
growth was made possible by the development in the 
art of ship-building, particularly with regard to the 
marine engine. The increase since 1840 in the 
effective power obtained by marine engines from the 
combustion of coal is shown in the following table: 

In 1840, 1 lb. coal propelled 0.578 displaced tons at 8 knots 

In 1850, 1 lb coal propelled 0.6 displaced tons at 9 knots 

In 1860, 1 lb. coal propelled 0.82 displaced tons at 10 knots 

In 1870, 1 lb. coal propelled 1.8 displaced tons at 10 knots 

In 1880, 1 lb. coal propelled 2.1 displaced tons at 10 knots 

In 1890, 1 lb. coal propelled 3.33 displaced tons at 10 knots 

In 1898, 1 lb. coal propelled 3.5 displaced tons at 10 knots 

This greater efficiency is due primarily to the 


development of the compound engine and the steam 
turbine, which have multiplied the energy obtained 
from a pound of coal. Moreover, the earning weight 
of the displacement ton has considerably increased as 
a result of more efficient construction methods. Thus 
the .578 displaced tons, given in the preceding table for 
1840, represented an earning weight of but .057, while 
the 3.5 displaced tons of 1898 correspond to a weight 
efficiency of 2.1. Today Ko of a ton of coal will bring 
a ton of cargo 5,000 miles. 

3. Steam and sail tonnage. — Less than a century 
ago, the steam vessel was a dream of enthusiasts; to- 
day the steam tonnage represents 93 per cent of the 
total gross register tonnage of the world. During the 
25 years ending July 1, 1915, the total tonnage of the 
world's merchant marine showed an increase of 122.7 
per cent while the total steam tonnage during the 
same period increased 252.2 per cent. If the carrying 
service of the steam tonnage could be measured, it 
would show an even gi-eater preponderance over the 
sailing tonnage because of the greater carrying 
efficiency of the steamer, due to its ability to make 
faster and more frequent trips. 

As late as 1890, sailing vessels had the upper hand 
over steamers in tonnage; and as late as 1896, in 
numbers.^ Shipping under the American flag con- 
tains a larger proportion of sail-tonnage than is the 
case of the merchant fleets of most countries. This 

1 On December 31, 191;';, there were on the Canadian registry 4,6;?.'> 
sailing vessels with a gross tonnage of 491,228, as compared with 4,132 
steam vessels aggregating 753,745 tons. 


is due to the fact that the American coastwise trade 
is restricted by law to American vessels only. The 
elimination of competition is responsible for the fact 
that an obsolete type of vessel, which in other fields 
of ocean shipping could not withstand the modern 
steamer, could hold on to a certain portion of its 
former exclusive domain. In the United States, also, 
the sailing vessel is losing ground, the total steam ton- 
nage having grown from 1,859,088 tons in 1890 to 
4,854,748 in 1915; an increase about five times as 
rapid as that of the total tonnage of the United States' 
merchant marine. 

The coasting trade of Canada is open to any British 
ship, or to the ships of any foreign state given such 
rights by a British treaty. A foreign-built British 
ship must take out a license and pay a duty of 25 
per cent on her market value before engaging in tlie 
coasting trade of Canada. Finally, the Governor in 
Council may open Canada's coasting trade to the 
ships of any foreign country which grants Canadian 
ships similar privileges. 

The sailing ship possesses advantages in its free 
motive power and its relatively small crew require- 
ments. But these are more than offset by slow speed 
and uncertainty as to the time of delivery of the cargo. 
These two qualities of speed and regularity have 
become more and more important. The interna- 
tional exchange of goods is based on contracts made 
before the departure of the vessel. It is estimated 
that the steamer possesses four times the sailing ship's 


efficiency as a cargo carrier, altho /4 to Vs of the 
steamer's hull capacity is occupied by bunkers and 
machinery. Turbines, compound engines, slender 
speed lines made possible by the use of steel in con- 
struction — all these have meant regularity, speed, 
more voyages per year. 

4. Oil-burning vessels. — The latest phase in the 
development of the steamer is marked by the introduc- 
tion of the Diesel engine. The oil-burning vessel will 
probably play an important part in the future history 
of shipbuilding and shipping. There is a threefold 
saving incident to this type of propulsion. There is 
a reduction in cost of wages because of reduced boiler- 
room requirements and consequently a smaller crew. 
An offset to this item lies in the higher initial cost of 
the ship, higher insurance rates and greater cost of 
repairs. But the main saving is in the cost of fuel. 
A typical freighter operating between San Francisco 
and Valparaiso, Chile, making five trips a year, 
will consume on each voyage an average of 231 tons 
of oil instead of 597 tons of coal. On the Pacific, 
the average cost of coal suited for steam purposes is 
about $6 per ton while the price of oil is $7. This 
being so the saving in the cost of fuel is about $10,000 
a year. Moreover the carrying capacity of the vessel 
is increased by about 5 per cent, owing to the fact that 
smaller space is occupied by the propelling machinery 
and required for the storing of oil. Even steel can 
sometimes be carried in the double bottom. 

While the internal-combustion engine is peculiarly 


adapted to freight ships up to about 5,000 gross tons, 
it is not limited to that class of vessels. Thus, when 
the Pacific Mail Steamship Co. planned to instal 
four 37,000 ton steamers in the New York-Orient 
service subsequent to the opening of the Panama 
Canal, they were to be equipped with oil-burning en- 
gines. President Schwerin estimated that the cost 
of oil would be approximately $4 a ton as against 
$6.50 for the ton of coal. 

The limiting factor of the Diesel ship is that the 
machinery is as yet too delicate to stand the pound- 
ing of the North Atlantic winter. The vessels are 
used predominantly in the warm water routes.^ 

5. Future of the sailing ship. — Tho the sailing 
vessel is being outclassed more and more by its more 
efficient rival, it is not to be assumed that it will vanish 
altogether. In two distinct services, its usefulness 
will probably continue ; in the coasting trade, which for 
some districts and some products is irregular and can 
not easily be organized into steamer service; and in 
the skirmish work of international trade, which must 
precede the establishment of new steamer connections. 
But the long cherished theory that the sailing vessel 
will remain the exclusive carrier of certain classes of 
bulky commodities on long voyages, such as the 
nitrate cargoes from Chile to Europe, will have to be 

1 A refinement of the Diesel principle in ship propulsion is found on 
the newest U. S. war vessels. For example, the "California" has oil- 
driven engines turn its dynamo, while motors utilize the current thus 
produced, to run the propellers. 


dismissed, in the face of the recent development in 
these trades. 

6. Replacement of wooden by iron mid steel vessels, 
— Even more rapid than the advance of the use of 
steam for propulsion was the development from the 
wooden to the iron and steel hull. The Civil War 
lent a strong stimulus to this movement by intro- 
ducing the ironclad into the war fleets of the world. 
The new theory aroused other countries more strongly 
than the United States, Just as the supremacy of 
the American sailing vessel had been challenged 
by the British steamer, so Great Britain also took 
the lead in the construction of iron and, since 1880, 
steel merchant vessels. In England, economic con- 
ditions favored this transition from the wooden to 
the metal hull just as they impeded the same develop- 
ment in this country. England, devoid of forests and 
supplies of timber, led the world in the manufacture 
of iron, while the United States enjoyed such an 
abimdance of cheap lumber that American ship- 
builders were loath to give up this advantage. The 
wooden vessel has practically disappeared from the 
merchant marine of Great Britain. In 1916, over 
99 per cent of all hulls were metal (4/5 steel). In 
the United States up to 1870 the progi'ess made in 
the construction of iron hulls was neghgible and in 
1916 over one-half of the tonnage under the American 
flag was of wooden construction in spite of the unques- 
tionable superiority of metal over wood. 

7. Classification of merchant fleet in regard to 

XV— 16 



service. — From the standpoint of service rendered we 
may classify the modern merchant fleet of the world 
in the following way: 

1. Freight 

2. Combination 
Freight and 

3. Passenger 

Running as tramps (cotton carriers, serv- 
ing Galveston). 

Running as liners (all lines to South Amer- 
ica except Lamport and Holt). 

Primarily Freight (Leyland Line, Bos- 

Half and Half (S.S. George Washington). 

Primarily Passengers (North German 

Express lines, with emphasis on speed 

Liners, with emphasis on luxury (Impera- 

This detailed classification is by no means found in 
every trade of the world. It is found at its highest 
stage of development in the transatlantic service, par- 
ticularly that connecting the North Atlantic ports 
with the northwest of Europe. Here is found the 
greatest density both of freight and passenger traffic. 
This traffic naturally attracts the powerful steamship 
lines of all countries. 

8. Tramp distinguished from liner. — From the 
table above it appears that while tramps are exclu- 
sively employed to carry freight, liners only in 
exceptional cases (i.e., in the highest stages of their 
development) confine themselves to passenger service. 
Most liners carry freight besides passengers; some 
carry freight exclusively. 


The division between liner and tramp is the most 
fundamental in the classification of merchant vessels. 
In 1912 the oversea commerce of the world was con- 
ducted by more than 25,000 steamers of which 1,555 
were liners. The remaining 23,500 vessels were 
tramps. While the liners were owned by barely more 
than one hundred companies the tramps were scat- 
tered among approximately 4,100 companies, firms, 
and individuals. The liners being the largest vessels 
in the world's shipping industry, it is only natural that 
when gross register tonnage is taken as the norm of 
comparison the preponderance of the tramp is con- 
siderably less striking than appears from a comparison 
of the numbers. Thus it has been estimated that out 
of 44,000,000 tons of shipping owned in the world in 
1912 two-thirds were tramps, of which Great Britain 
owned at least 70 per cent. 

A tramp steamer is a cargo steamer which is built 
for hire and is not connected with any particular 
service. A vessel may be operated either singly or as 
the member of a line. The tramp is operated as a 
single unit. In the Report of the Royal Commission 
on Shipping Rings the difference between the service 
supplied by the liner and the tramp is described as 
follows : 

Tlie tramp loads and usually discharges at one port and 
preferably a port where the dues are small. It does not sail 
at a fixed date, but waits until it has a full cargo. More- 
over, the tramp does not confine itself to a particular trade. 
It comes into a trade when the freight prospects are good and 


leaves it when they are bad. It acknowledges no obligation 
except to go wherever it can obtain the highest freight. 

The liner, on the other hand, generally sails according to 
a fixed time-table almost with the regularity of a railroad 
train and she sails whether full or not full. She usually 
loads and discharges at several ports (to serve her trade) 
and consequently has large expenses in port dues and 
charges, and most important of all she stays in the trade 
whether the times are good or bad. Moreover, whereas in the 
case of the tramp the charter party usually requires the 
merchant to discharge at the rate of so many tons per day 
with heavy penalties for demurrage, the discharging in the 
case of the liners is effected by the liners themselves, at their 
own risk. 

9. Constnwtion of tramp steamer. — First of all, 
the tramp steamer is a comparatively inexpensive 
vessel built for the sole purpose of carrying bulk 
cargoes as cheaply as possible. Speed being a 
secondary consideration with the tramp steamer, its 
construction can be planned along the lines of gi'eatest 
carrying capacity. It is therefore built in full form 
upon a sort of general average model, to fit it for as 
many kinds of services as possible. The "block 
co-efficient" of a tramp steamer is usually around 80 
per cent, while that of a fast ocean liner is hardly more 
than 62 per cent. That is, if you were to pack a 
tramp in a rectangular box that barely contained her 
she would occupy 80 per cent of the box; while the 
liner — being cut away fore and aft — w^ould fill but 62 
per cent of her container. 

Further economy of construction of the tramp is 
obtained by the standardization of tramp steamer 


building. This has been carried to a high degree espe- 
cially in Great Britain. 

10. Economies of the tramp. — The economies of 
operation of the tramp steamer center around the low 
speed adequate for its service. The coal consumed by 
a fast liner in one day would serve the average tramp 
for weeks. It is a well known law of physics that 
high speed is attained at a much greater expenditure 
of power per unit than that required to traverse the 
same distance at a lower speed. The coal consumed 
by the Mauretania in attaining a speed of 25 knots is 
not double, but probably 20 times the amount of coal 
consumed by a freighter, assuming the latter is con- 
tent with a speed of 12/4 knots. Greater speed also 
demands greater engine room, bunker space and 
crew accommodations, thus leaving less space for 
freight. The advantage of greater speed is more 
frequent voyages in a year and higher freight rates 
per voyage. Therefore the most economical speed 
will be determined by duly weighing the favorable 
and unfavorable results of speed increase. The point 
of equilibrium between these two groups of factors 
will be constantly raised by improvements in the con- 
struction of the vessel and in the engine ; at present it 
lies at about 11 knots an hour. In twenty years this 
most economical speed was increased about 3 knots. 
In the same period the most advantageous size of 
tramp has increased from 5,000 to 7,200 tons. 

11. Occupation of the tramp. — The tramp steam- 
er's chief occupation in marine transportation con- 


sists in the carrying of low-grade freight and bulk 
goods such as grain from the Black Sea, Argentina, 
North America, and India; ore from Spain, Chile or 
Cuba; timber and cotton from Gulf ports; nitrate 
from Chile; soy beans from Manchuria; sugar from 
Java; jute from India; clay, chalk and coal from Eng- 
land. Onh^ occasionally do manufactures also move 
in full cargo lots. The International Harvester Com- 
pany ships in tramp steamers a considerable number 
of full cargoes to regions like the Black Sea to which 
there is no adequate liner connection from this coun- 
try, and to other sections which possess liner connec- 
tions, but do not afford sufficient liner space for the 
heavy seasonal shipments of the International Har- 
vester Company. 

12. Legal status of the tramp. — The legal status of 
a tramp differs essentially from that of the liner. The 
chief distinction is that only the latter is considered a 
common carrier. It l>as been well established by a 
long line of decisions in the Federal Courts that when- 
ever a charter party gives the charterer the full capac- 
ity of a ship, the owner is not a common carrier, but a 
bailee to transport as a private carrier for hire. When, 
however, a tramp is taken out of its regular service 
and is made a part of a line service, its cargo space 
being rented to various shippers, the tramp of course 
loses its peculiarity and becomes a common carrier. 

Such a transfer frequently occurs. In nautical lan- 
guage this is called "keeping the tramp on the beat." 
The reverse takes place when a liner is sent "tramp- 


ing." This interchangeability shows that the line 
of demarcation between the hner and the tramp is 
not so clearly drawn as sometimes is assumed. It 
is a difference in ship use, not in ship type. This nat- 
urally can refer only to the lowest type of line vessel, 
i.e., that which is confined solely to the carrying of 
freight. The liner in its higher forms of develop- 
ment is too different in construction to allow an inter- 
change of the nature described. As Kipling said, 
"the liner, she's a lady," and as such is too good to per- 
form the menial work of the tramp. The liner is a 
thorobred, while the tramp is the truck-horse of the 

13. Operation and management of liners. — From 
our division of merchant ships into seven classes it is 
evident that considerable difference exists between the 
various types of liners. However, there are certain 
principles common to the operation and management 
of them all. High cost of construction, high speed, 
high cost of maintenance and management, expensive 
office and soliciting forces — these all drive the ex- 
penses of the regular line trade far beyond the point 
reached in the charter traffic. But these expenses 
assure the liner advantages in the form of higher 
freight rates, lower insurance rates, and the enjoy- 
ment of a reliable clientele. The liner monopolizes 
the valuable passenger traffic and the carriage of mail 
and of valuable express cargo. 

While mixed cargoes of general merchandise in less 
than cargo lots are the specific domain of line serv- 


ice, there are certain heavy commodities which require 
hne service. Just as human freight exacts certain 
considerations from the shipbuilding engineer, so do 
many kinds of freight. Thus, perishable goods like 
carcasses and fruits require vessels especially con- 
structed for their transportation. Australian and Ar- 
gentine meat, and bananas from the West Indies, are 
not carried by tramps, but by liners especially adapted 
to the particular requirements of these trades. 

Even the carrying of coal is not exclusively re- 
served to the tramp steamers. In the short-voyage 
service between the east coast of England and Scot- 
land and the Continent, especially to Hamburg and 
Rotterdam, it pays to instal automatic discharging 
machinery in colliers which run according to regular 
schedule. Likewise, the gas company at Boston has 
a regular service of colliers that supply it with coast- 
wise coal. 

A concrete illustration of the various types of ves- 
sels discussed in this chapter will be found in the 
following table, which shows the capacity, speed, and 
power of a typical tramp, a freight-carrying liner, 
several combination vessels and of the two types of 
purely passenger ships. 

Dead speed 
Gross Net weight at sea Indicated 

Vessel tonnage tonnage capacity (knots) H.P. 

Tramp i I,()fi5 J,930 7,800 lOy. 2,500 

Freight-carrying Liner 

"Norderney" .5,496.6 3.573.51 7,700 IQi/. 2,000 


Dead speed 
Gross Net Weight at sea Indicated 

Vessel tonnage tonnage Capacity (knots) H.P. 

Combination Vessels 

"Breslau" 7,5;?4.09 4,807.86 8,600 12% 3,600 

"Minnewaska" 14,317 8,878 15,000 15 

"George Washington". 35,569.85 15,378.74 13,300 IQi/o 21,000 

Express Steamers 

'•Kronprinces.sin Cecile" 19,503.22 6,584.44 8,300 23% 45,000 

"Bismarck" 2 56,000 24,000 15,000 25 

"Mauretania" 31,550 9,145 1,500 25 68,000 

1 Typical tramp, computed from latest available figures, by Engineer's 
Society of Northern England. 

2 Approximate figures. 


In the modern development of shipping what places limits 
upon the size of vessels ? 

Is the sailing craft likely to disappear altogether frotti ocean 

What advantages result from the substitution of oil for coal as 
fuel, and what appear to be the limitations in the use of oil-burn- 
ing vessels.'' 

Wliat is a tramp? What is a liner? How do they differ in 
construction and in legal status ? 

What points of superiority has the tramp as a cargo boat over 
the liner? 

How does the trade utilizing the liner differ from that em- 
ploying the tramp? 



1. Epoch of the merchant carrier. — So far we have 
followed the development of the ocean carrier from 
the standpoint of technical improvement and of serA- 
ice rendered. We have looked upon the vessel as an 
instrument for the interchange of commodities and 
persons, without regard to its relation to those who 
furnish the cargo, i.e., the shippers. The shipper is 
either a merchant or a manufacturer. The relation 
between these two classes and the ship owner forms 
the basis of the following discussion. 

Until about 1812, at the end of our second war with 
Great Britain, the unit of ocean transportation was 
the single private vessel. It belonged and was used 
by a merchant or a roving captain and his associates, 
who formed a trading company that used the vessel. 
In those days the vessel did not carry for all shippers ; 
it was not a public carrier. 

There are many reasons why this primitive type 
was not, at an earlier date, superseded by the public 
carrier. First of all, the time consumed in the ex- 
change of correspondence and documents referring 
to the sale of and payment for merchandise was 
such as to almost prohibit tlie development of a 



public carrying service, whose requisite is found in 
the sale of the cargo to the foreign consignee be- 
fore the departure of the vessel. In addition, the 
present form of consignment shipments is based on 
an extremely high development of mercantile organ- 
ization and was out of the question a century ago. 
In those days it was only natural that the merchant 
himself should own and operate the ship, and there- 
fore that each vessel should be the trading unit. The 
small sailing vessel then used coidd easily be filled by 
the wares of one enterprising merchant. It was not 
essential whether the merchant himself conducted the 
voyage or intrusted his wealth to a reliable captain 
or to a "supercargo." International trade consisted 
largely of luxuries and exotics, and only a few firms 
dared to enter this adventiu'ous business. There- 
fore, both the steady flow of merchandise and the mul- 
titude of shippers, which characterize the foreign com- 
merce of today, were lacking. The need for public 
carriers did not exist. Finally, the unsettled condi- 
tions of the period formed an unsiu'mountable obsta- 
cle to the establishment of regular trade connections. 
Semi-piratical conditions prevailed on the sea, and 
foreign navies vied with privateers and pirates in 
preying upon American ships; ordinary commerce 
was daring adventure. 

2. Coming of the puhlic carrier. — A great change 
in shipping practice took ])lace when men, instead of 
building vessels to use themselves, built them to be 
rented or chartered to shippers. While chartering 


is almost as old as histoiy, it did not affect the western 
world until the end of the eighteenth century. 

As chartering came into vogue more generally it 
was deemed advisable to establish foreign branches 
and agencies who took care of the cargo after delivery 
and attended to the assembling of a return cargo, in 
imitation of the great East India companies. This 
growing organization of shipowners proved valuable 
in the subsequent establishment of regular steamship 

Repeated attempts to establish such lines appear to 
have been made toward the close of the eighteenth 
century, but not until peace and security were firmly 
established were these efforts crowned with success. 
Considerably later, when the flow of bulky goods, such 
as timber, grain, coal, and ore, had become so continu- 
ous and voluminous that the full cargo lot became the 
unit of transportation, the modern tramp entered the 
field. Even a short outline of the development of the 
public carrier in the line and charter traffic would lead 
too far. The public carrier is still the ship of today, 
and wherever private carriers are found they have 
come into use because of special conditions which will 
be discussed below. 

3. Renaissance of the private carrier. — The main 
cause of the return of the private carrier is to be found 
in the magnitude of the modern corporations. This 
has made possible the handling by one concern of such 
vast quantities of coal, iron, petroleum, asphalt, fruits, 
and other products that the use of steamship lines 


as part of a single business has become economical. 

To understand this development we must ascertain 
why the services of either the modern liner or the mod- 
ern tramp are insufficient to satisfy the requirements 
of twentieth century shippers. It is true that the 
modern liner takes large quantities of bulk commod- 
ities, but this portion of the business is looked upon as 
a by-product. The bulk goods serve to fill the space 
left vacant by the better-paying general merchandise. 
It therefore follows that if commodities, such as steel 
rails and the like, move in directions where general 
cargo can not be obtained, it would not pay to estab- 
lish a public line. The regularity and the volume 
of these movements, however, sometimes necessitate 
the establishment of regular sailings for the private 
corporation. The result is the private line. 

Another reason for the establishment of private 
lines may be found in the necessity of providing ves- 
sels built especially to meet the requirements of a par- 
ticular trade. In either case, the same factors that 
favor the development of large-scale production and 
the consohdation of enterprises along horizontal as 
well as vertical lines, are also applicable to these cases 
of absorption of the water-transportation service by 
the manufacturing or producing corporation. 

4. Examples of private carriers. — An example of 
the first case of private-line establishment is the serv- 
ice between New York and Brazil, established by the 
United States Steel Corporation, inspired by large 


contracts for rail and other steel products which liad 
heen secured in Brazil. The company announced: 
"The ships of this line will seek general cargo in addi- 
tion to that supplied by the Steel Corporation for its 
Brazilian customers, and furthermore, whether loaded 
or not, the ships will return from Brazil direct to New 

The best example of the establishment of a private 
steamship line to meet the special requirements of a 
particular trade is afforded by the United Fruit Com- 
pany. The fact that this company has gradually de- 
veloped into one of the greatest common carriers of 
this country makes this case particularly interesting. 
This line is still a private steamship line, because the 
carrying of passengers and general freight is only 
incidental and a by-product of the transportation of 
the company's own products, bananas and sugar. 

5. United Fruit Company and the Banana trade. — 
The United Fruit Company operates or controls the 
majority of the steamers engaged to carry bananas 
and other fruit from the West Indies and the Carib- 
bean regions to the United States and Europe. The 
banana trade is comparatively young. Only twenty 
years ago the banana was a luxury. While the 
banana trade was undeveloped, all of it was carried by 
tramps chartered either for one voyage or for a season. 
The ordinary tramp vessel proved too slow to render 
satisfactory service to the banana shipper. A ship- 
builder, however, will not construct a vessel suitable 
for only one particular purpose unless constant em- 


ployment is guaranteed. Either he will sell it or, if 
it is to be chartered, he will insist upon a time charter 
covering a considerable number of years. This diffi- 
culty in supplying necessary and suitable tramp 
tonnage for the banana shipments, coupled with the 
increasing demand for regularity in the trade, led to 
the establishment of the line service of the United 
Fruit Company in 1899. 

The largest ship employed by this company during 
the first year of its existence was a vessel of 2,000 tons, 
and had a storage space for 35,000 bunches of ba- 
nanas. During the early years all the company's 
ships were chartered from Norwegian or other foreign 
owners. Soon it became necessary to acquire vessels 
better suited for the carrying of bananas northbound 
and of the general merchandise which was sought as a 
return cargo. This led to the upbuilding of the 
"Great White Fleet," a line of stately steamers which 
are among the best of all the ships sailing under the 
American flag. This flag does not fly on all of the 
forty-three vessels which today form the fleet of the 
United Fruit Company, representing a gross register 
tonnage of over 200,000 tons; about one-half are 
under British registry, and a certain percentage are 
still under Norwegian registry. 

6. Coal and petroleum carried by private lines. — 
Other trades in which private or industrial lines ^ have 

1 Among examples of private or industrial lines in Canada may be 
mentioned the steamers operated by the Dominion Coal Co, (the Black 
Diamond Line), the Nova Scotia Steel and Coal Co., and the United 
Fruit Companies of Nova Scotia, Limited. 


been established are the asphalt, lumber, coal and 
petroleum trades. Recently the Pocahontas Consol- 
idated Collieries Company, together with the Poca- 
hontas Fuel Company, formed the Pocahontas 
Navigation Company. They have acquired a fleet of 
steel vessels of over 5,000 tons each, which carries coal 
and other merchandise to foreign ports. 

A more conspicuous example is offered by the pe- 
troleum trade. Here the special tank vessels offer 
great advantages with respect to greater utilization 
of the cargo space of the vessel and elimination of 
unnecessary handling. These advantages are so 
great that even the impossibility of taking return 
freight and the consequent expense of ballast voy- 
ages cannot offset them. Only large concerns with 
large capital can afford to engage in this business, 
for not only must the vessel be supplied, but heavy 
capital investments are required to build pipe lines 
from the well to the shore, and to furnish pumps, 
tanks and other equipment at the seaboard. 

In recent years the tank steamer has begun to be 
superseded by the tank barge, a tank vessel which does 
not proceed under its own steam but is towed by a 
tug. These barges are no novelty in the American 
coastwise trade, and now they even cross the Atlantic. 

7. Merchants' private lines. — The examples of pri- 
vate lines given so far are industrial lines, lines con- 
trolled by the manufacturer or producer. But mer- 
chant houses have grown into such powerful and 
wealthy corporations that the volume of their business 


justifies the establishment of their own lines. Thus 
W. R. Grace and Company, one of the largest mer- 
cantile firms of the United States, owns the "Mer- 
chant's Line," furnishing bi-monthly service from 
Xew York to all ports on the West coast of South 
America. The latest ships in this trade, like the 
Santa Barbara^ are of as much as 10,000 tons dis- 
placement. W. R. Grace and Company recently ac- 
quired several vessels of the former Pacific Mail 
Steamship Company. A much younger but very 
keen rival is the firm of Gaston, Williams and Wig- 
more, which altho not yet owning its ships, keeps up 
a regular line service by means of chartered vessels. 
The German steamship line known as the Woer- 
mann Line was originally established as a branch of 
the famous Hamburg mercantile house of Woermann. 
The Elder Dempster line of Liverpool is owned by 
the same people who control the trading firm of that 
name. However, in their present form these lines 
could hardly be classed as private. 

8. Pacific Ocean and the railroad-steamsliip line. — 
The Pacific Ocean, because of the length of passage 
and the absence of purely local traffic, seems to be the 
natural sphere of the railroad-steamship line. Until 
recently the Pacific Mail Steamship Company, con- 
trolled by the Southern Pacific Railroad, divided the 
field with the Great Northern Steamship Company 
of the Hill roads, the Pacific service of the Canadian 
Pacific Railroad and certain Japanese lines. Of 
these the Canadian Pacific Company, with its fines on 

XV— 17 


both oceans, is by far the most powerful of all the 
railroad-steamship lines. It is encouraged and sub- 
sidized by the British and the Dominion governments 
and has done much to build up the trade and com- 
merce of our neighbor in the north. United States 
railroads have proved their enterprising spirit by es- 
tablishing trans-oceanic services on the Atlantic. 
Thus, the Pennsylvania Raikoad Company partici- 
pated in the establishment of the American Line to 
Liverpool. The present Johnston Line from Balti- 
more to Liverpool was originally owned by the Balti- 
more and Ohio Raih'oad. 

9. Foreign railroad- steamship lines. — In Eng- 
land the railroad-owned steamship line is common in 
almost all the shorter routes from ports on the east 
coast to the Continent and also in the service across 
St. George's Channel and the Irish Sea, separating 
Ireland from Great Britain. Thus the North Eastern 
Railroad runs a line in its own name from Hull to a 
large number of Continental ports. The Lancashire 
and Yorkshire Railroad has services to nine ports of 
the Continent and to Scandinavia. The British rail- 
roads have, thus far, not entered the trans-oceanic 
business ; and there is little reason to believe that they 
will do so in the future, because of the splendid 
steamer connections between almost all ports of mod- 
erate significance. The oversea needs of the country 
seem to be adequately covered now. 

To those who are anxious to see the American flag 
on the ocean restored to the place of honor it once 


held, the effect of hostile legislation on the growth of 
American railroad-steamship lines must seem one of 
the most mifortunate occurrences of recent economic 
history. The Pacific Mail in 1912 asked permission 
to build four 37,000 ton American liners to run from 
New York to the Orient thru the Panama Canal, 
calling at San Francisco. These boats, in addition to 
the large boats which the Pacific Mail already had, 
would have given us an excellent fortnightly serv- 
ice to the Far East. Congress refused to let these 
boats cany freight from New York to San Francisco, 
a service which alone would have made the venture 


Why could not public ocean carriers grow up under trade con- 
ditions of the eighteenth century? 

What conditions have favored the growth of public carriers ? 

Describe the private carriers established on the ocean by vari- 
ous manufacturing concerns. 

Name some of the more important lines operated by mer- 

Explain how railroads came to enter the field of ocean trans- 



1. Growth of sea-home trade. — The nineteenth 
century has witnessed a greater expansion of ocean 
commerce than all the centuries past. The British 
foreign trade in coal, which is by far the most volumi- 
nous branch of the world's shipping, has grown from 
its insignificant beginnings of 100 years ago to the 
almost incredible size of 65,000,000 tons. To grasp 
the real meaning of this figure, one should think of an 
ordinary railroad freight car of a capacity of 25 tons, 
and imagine a line of 2% millions of such cars stretched 
out across the surface of the earth. To be sure, no 
other branches of the trade of the world even approach 
the magnitude of these figures. "When compared with 
the insignificant amount which represented the com- 
modity exchange of only 100 years ago, the following 
figures showing the bulk of the exports and imports 
of the United States are astonishing: 



Cotton 2,220,000 tons 

Mineral oils 4,100,000 tons 

Fertilizer 1,540,000 tons 



Coal (except Canada) 4,500,000 tons 

Naval stores 85,000 tons 

Oil cake 750,000 tons 

Tobacco 200,000 tons 

Wheat 170,000 tons 

Cora 220,000 tons 

Oats 28,000 tons 

Rye 55,000 tons 

Dried grain 60,000 tons 

Lumber (all kinds) 3,180,000 tons 


Sugar (taxable) 3,225,000 tons 

Coffee 440,000 tons 

Iron ore 1,490,000 tons 

Nickel ore 36,000 tons 

Copper ore 445,000 tons 

Sulphur ore 832,000 tons 

Manganese ore 228,000 tons 

Asphaltum 140,000 tons 

Kainit 540,000 tons 

Potash 285,000 tons 

Manure salts ^60,000 tons 

Guano 22,000 tons 

These figures illustrate the volume of the ocean 
traffic of today. So far as its weight is concerned, 
there are no statistics showing the growth of the 
foreign trade of the United States. It may be 
assumed that the relation of weight to value has 
remained almost the same, or that the increase of the 
value of exports relative to weight has been offset by 
a decrease in the case of imports. The following 
table, therefore, which gives the value of exports and 


imports for the last fifty years, supplies an indieation 
of the increasing weight of our foreign trade ; 


(in millions of dollars) 
United States Canada 

Exports Imports Exports Imports 

1850 144 173 

1860 334 354 

1870 393 436 74 75 

1880 836 668 88 86 

1890 742 789 97 122 

1895 808 732 114 111 

1900 1,395 850 192 190 

1905 1,519 1,118 203 267 

1910 1,745 1,557 301 392 

1911 2,049 1,527 297 4*72 

1912 2,204 1,653 315 559 

1913 2,466 1,813 393 692 

1914 2,365 1,894 479 651 

1915 2,769 1,674 491 629 

1916 4,334 2,198 883 565 

1 The corresponding figures for Canada have been added as illustrating 
the same point. The ten-fold increase in values since 1870 probably indi- 
cates a like increase in weight or bulk. 

2. Evolution of the freight service. — We have seen 
that in the early days the merchant was his own ship- 
owner. As long as this condition prevailed no market 
for ship tonnage existed. The first beginnings of 
such a market are found in the earliest phases of the 
charter business. A merchant or a group of mer- 
chants would charter, i. e. lease, a whole ship for one 
round voyage. Cargo lots were the unit of trade, 
while "berth cargo" or "part cargo" is an outgrowth 
of later developments. The earliest fbrm of the 


charter business employed the trip charter exchisively, 
as the uncertainty of wind conditions made the time 
charter appear too risky; and until the merchant 
system was superseded by the commission house sys- 
tem, the trip charter remained the prevailing manner 
of chartering. 

The growth of the size of the vessel made it appear 
more and more difficult for one party to assemble a 
full cargo. Furthermore, the growing variety of 
merchandise and the development of an increasing 
number of markets resulted in a growing number of 
part-cargo shipments calling for space. This traffic 
grew so rapidly that in Hamburg as early as 1800 
part cargoes had become more frequent than whole 
ship loads. 

3. Berth traffic. — The traffic in early times was 
too iiTegular for line service to exist. The boats 
that were rented or chartered to various shippers 
were merely *'put on the berth." That means, a 
shipowner, with the aid of brokers who were in touch 
with the merchants, offered his ship for a particular 
voj^age to all who wished to use it. Sometimes the 
brokers would take the initiative, and would them- 
selves charter vessels for the purpose of putting them 
on the berth. While this was the customary method 
of shipping general merchandise during the time when 
line traffic had not yet developed, today a ship is only 
occasionally put on the berth. This occurs more 
frequently at the end of a route, where more freight 
has been received than is ready to be dispatched. A 


freighter may also be employed in berth traffic in 
order to fight exorbitant liner rates, 

4. Line traffic. — As the traffic in general mer- 
chandise gi'ew in volume and regularity along 
definitely estabhshed trade routes, berth traffic gave 
way to regular line service which follows definite 
schedules. Vice versa, the organization of hne 
services acted as a strong stimulus to the growth of 
the exchange of commodities. Today the liner has 
almost complete control over the movement of general 
merchandise, while bulk goods are the domain of the 
tramp. In the charter traffic the introduction of 
steam-power resulted in the emancipation of shipping 
from the uncertainty of weather conditions, and 
thereby brought about a change from the trip charter 
to the tune charter. 

5. Modern charter market. — This development has 
its center in a few ports near the North Sea basin. 
Here, in close vicinity, located in the great European 
ports, such as Le Havre and Liverpool, are the domi- 
ciles of the great shipping companies of the world. 
Great Britain and northwestern Europe attract num- 
berless tramps which either seek this section of the 
world as the destination of their cargo or as the source 
of an outward cargo. The latter is hardly ever lack- 
ing because of an endless stream of British coal which 
flows to ahnost every corner of the globe. It is there- 
fore not surprising that the entire charter trade is 
directed from central points located in this part of 
the world; particularly in London, Hamburg and 


Rotterdam. Tramps that come to New York for 
instance, do not ordinarily make their engagements 
here, but are chartered in one of these great charter 
markets of Europe. The centrahzation of the charter 
market of the world in a relatively small area is 
rendered possible by the development of all means 
of communication, particularly the telegraph and 
telephone. The gradual completion of the net of 
international cables and the instalment of wireless 
j)lants are the basis of the organization of the modern 
charter market, bringing a multitude of local estab- 
lishments into one great international organization. 

The overwhelming preponderance of Great Britain 
in the charter trade is due, first to the fact that its coal 
export furnishes the steadiest employment to tramps, 
secondly to the general superiority of Great Britain 
in the shipbuilding industiy, and in the construction 
of tramps in particular, and thirdly to the fact that for 
generations British capital has been so freely lent to 
those who wish to build tramp steamers that even in 
times of depression the construction of tramps has 
hardly slackened. The resulting supply forms a 
chronic danger to the sound development of the 
w^orld's freight market. In years of greatest depres- 
sion large numbers of tramps lie idle awaiting only a 
slight increase of the freight rate in their eager search 
for cargo. 

6. Operation of charter business. — The ingenious 
solution of the great world puzzle of bringing together 
more than twenty-four thousand tramp vessels scat- 


tered over all oceans, en route to hundreds of ports 
in all climes, with the freight equally scattered, is ad- 
mirably described by Professor J. R. Smith in the 
following way: 

The method of securing cargoes for ships, and ships for 
cargoes, is best described by the relation of some common 
incidents of every day occurrence. A Liverpool shipowner 
had a steamer in the Mediterranean loaded with jute, which 
she was carrying from Calcutta to Dundee. The owner de- 
sired another cargo for the steamer at the end of the voy- 
age. Knowing there was nothing in Dundee he wrote to his 
agent in Newcastle, and himself made inquiries among the 
shippers of Liverpool. The Newcastle man suggested a 
cargo of coal to Hamburg, but this the owner declined, and 
sought the aid of his correspondent in Dumbarton, but the 
iron trade of Dumbarton was not promising. Meanwhile, 
the days were passing, the vessel had reached Dundee and 
there was nothing provided for her. The Liverpool man 
was himself the correspondent of a London firm of ship- 
brokers who telegraphed him at this juncture that they had 
offers of a shipment of German coke to go from Rotterdam 
to Santa Rosalie, lower California, and of another of 
Cardiff coal for Buenos Aires. The first the shipowner de- 
clined as being only suitable for a sailing vessel, and because 
of news from across the Atlantic he allowed the second to 
go to a steamer then lying at Antwerp. Three days before 
this he had cabled to his New York correspondent a descrip- 
tion of the steamer, and offered his services to carry grain to 
the United Kingdom at a certain rate, saying that she 
could load after a certain date or between certain dates. 
As New York freight was dull, the firm in that city tele- 
phoned their Boston and Philadelphia agencies. At the 
same time a Chicago grain exporter decided to export 150,- 
000 bushels of corn, and telegraphed to his agents in New 
York and Philadelphia to secure offers of transportation. 
In the shipping exchanges of those cities the representatives 


of the Chicago exporter and the Liverpool shipowner bar- 
gained face to face. Offers were, however, made at the 
same rate by the New York representative of the owner of 
a ship then off Rio Janeiro with a cargo of Chilean nitrate 
bound for New York, and also by a Philadelphia broker who 
sought future employment for a vessel then in the Red Sea 
with a cargo of Java sugar for Philadelphia. The wary 
broker held aloof for a few hours in the effort to beat down 
the rate. The Liverpool owner was informed of this com- 
petition, and still having nothing for his steamer he cabled 
that he would charter his ship for three pence (six cents) 
less per ton than he had offered, or for the same rate he 
would take freight to Continental ports as far as Copen- 
hagen. He added to his cablegram the word "range," which 
means in cable code that he would send the ship to the Dela- 
ware bay with the understanding that she might be ordered 
to New York, Philadelphia, Baltimore, or Norfolk to load. 
This offer secured the freight, for the representatives of the 
sugar ship and the nitrate ship, having more time at their 
disposal, preferred to take chances rather than cut rates. 
The steamer which, pending negotiations, had proceeded to 
Newcastle, coaled and anchored, departed thence in ballast 
for the Delaware. Meanwhile, the Chicago exporter found 
that railroad conditions made Norfolk the most convenient 
port to which to deliver his corn at the appointed time. 
When the steamer reached the Delaware breakwater (just in- 
side Cape Henlopen), the captain received telegraphic in- 
structions to go to Norfolk. There he loaded a full cargo of 
corn and, as the final destination of the corn was still unde- 
cided, he sailed to the Channel port of Falmouth for orders. 
LTpon being sighted there, he was instructed by signal to pro- 
ceed to Copenhagen, where the corn was discharged and the 
vessel was ready for another contract which the agents had 
been trying to arrange since the day they learned of the final 
destination of the corn cargo. 

7. Port of destination. — This is a typical operation 
in the charter business. As appears from the 


example just given, the exact port of destination at 
which a vessel is to discharge her cargo need not be 
named in the charter party. Phrases such as "one 
safe port on the continent between Havre and Ham- 
burg both inclusive" or "U. K. H. H. range" (mean- 
ing United Kingdom, Hamburg, and Havre) are 
commonly found. Cork, a port at the southwestern 
coast of Ireland, is frequently named in charter parties 
as the port at which a vessel is to call for orders 
announcing the final destination. The shipper wishes 
to delay his final decision as to the place of delivery 
of the cargo to the last possible moment to take 
advantage of market developments, especialh^ price 
fluctuations. This practice of "calling at Cork for 
orders" corresponds to the practice of diversion 
and reconsignment in railroad transportation. The 
instalment of the wireless apparatus on tramp steam- 
ers will bring further development, for thereby the 
shipper will be kept in constant touch with his vessel. 
The fact that the negotiations between shippers and 
shipowners' representatives are conducted in ex- 
changes should not lead to the belief that tonnage 
has in any way become negotiable and can therefore 
be traded in generic terms without reference to a par- 
ticular vessel. It is true that phrases such as "handy 
vessel," or "moderate-sized vessel" are found in 
charter parties, but they are invariably supplemented 
by particulars naming a specific vessel. The basis of 
negotiability is standardization, and while considerable 
progress has been made in standardizing charters and 


in developing standard types of vessels, this process 
has by no means reached a negotiable point. 

8. Ship-brokers. — In view of the complex natm*e 
of the charter party it is not surprising to find that 
almost all charter parties are carried out thru the office 
of a broker. The merchant or manufacturer who 
wishes to charter a vessel has no way of gauging the 
supply and demand of vessel tonnage. Here the 
middleman is indispensable. The brokers, being in 
constant touch with each other, as well as with shippers 
and shipowners, are in a position to exercise a steady 
and equalizing influence upon the formation of charter 
rates by publishing market conditions in private 
reports and in such papers as Lloyd's List and Ship- 
ping Gazette, Fairplay, and others. In some cases 
the broker has authority to act as agent for shipper 
or shipowner. He seldom is a shipowner himself. 

9. Charter parties. — The terms "trip charter" and 
"time charter" explain themselves, but a few words 
should be said regarding the extent of their applica- 
tion. In the case of a trip charter, which may cover 
either a single or a round trip, the shipper usually 
agrees to pay a given sum per ton of cargo, or, in the 
case of grain, so much per bushel. If the vessel is 
chartered on time, i.e., for a period of three months 
or a year or more, the rate is usually based on the 
dead-weight capacity of the vessel. While under the 
trip charter the owner ordinarily pays for all expenses 
of operating the ship, including even port charges, 
under the time charter the owner pays the crew 


and provides for food and maintenance and also keeps 
the ship in repair. 

10. Operation of line traffic. — The handhng of the 
charter traffic, because of the uniformity of cargoes, 
is simple when compared with the intricate system 
prevailing in the line business. In the line busi- 
ness each cargo consists of a multitude of shipments 
each of which represents a separate transaction. 
Usually, each shipment consists of various items which 
require different freight rates according to their value 
and volume. Tho rate sheets are issued by the 
steamship companies, covering certain articles, these 
rate sheets are not binding. They are merely "for 
information." The printed rates must be confirmed 
for each item shipped on a certain steamer. Even 
forwarding agents and commission houses doing a 
large and regular business have to make sure in each 
case what the rate will be. 

Occasionally, large shippers who can calculate in 
advance the amount of space tliey will require for their 
shipments in a given direction during a certain period, 
will make time contracts specifying rates either 
directly with the carrier or with the freight forwarder. 
These contracts are usually made on the basis of the 
rates current at the time of the contract. The shipper 
prefers a steady rate on which to base his sales. The 
agent of the steamship company is willing to accept a 
lower rate if he can thus secure all of the shipper's 
business and avoid competition. But contracts of 
this nature are being more and more avoided by the 


steamship companies. They chiim that if the current 
rate goes up they lose, if it goes down the shipper 

11. Seaboard brokers. — In our discussion cover- 
ing the methods employed in handling foreign ship- 
ments it was mentioned that a great many of these 
shipments, especially those originating in inland 
points, were carried out thru the medium of freight 
forwarders or seaboard brokers. 

The seaboard broker's services are twofold in 
their nature. One part of their value consists in the 
saving of trouble arising from the multitude of details 
that have to be attended to when making foreign ship- 
ments ; the other part results in a saving of freight on 
both the land and water carriage. 

In the case of shipments to certain foreign destina- 
tions, primarily Europe, the raih-oads issue thru rail- 
and-ocean bills of lading and their foreign freight 
agents attend to the transfer of goods at the seaboard. 
In other cases the shipper, unless he has an expert 
organization of his own or sells abroad thru a com- 
mission house, employs a forwarder to handle his 
shipment at the seaboard. 

12. Cost of employing forwarding houses. — Ship- 
ping thru a responsible forwarding house is not 
expensive when one considers the various duties per- 
formed by this party. He receives the consignment 
from the railroad, has it carted to the steamer, takes 
©ut insurance, attends to the certification before the 
foreign consul, ships the goods, and in some cases 


renders additional service at the foreign end of the 
journey, such as handling the goods thru to the point 
of inland destination. In that case the forwarder's 
correspondent assumes the duties which would other- 
wise have to be performed by customs brokers. For 
these services the forwarder usually charges the con- 
signee unless the seller chooses to assume the cost. 
The forwarding house usually ships in its own name 
to avoid the necessity of asking for power of attorney 
in making oath before the consul. The forwarder 
also attends to the collecting of the seller's money. 
The seller draws on the forwarder, attaching to his 
draft the railroad bill of lading. The latter hon- 
ors the draft, gets the goods, puts them aboard a 
ship, and draws on the foreign buyer for a sum equal 
to the seller's draft plus the value of the forwarder's 

13. Steamship agents, — Besides the forwarders, 
the steamship agents are important in handling export 
freight. Almost all the great steamship lines plying 
to our ports are represented in the great inland centers 
whence much of the cargo originates. Thus, the 
International Mercantile Marine Companj^ has a 
general western freight agent at Chicago, a north- 
western agent at Minneapolis, and a southwestern 
agent at St. Louis. These representatives solicit 
freight for all direct services run by their companies, 
without favoring any single one of the ports touched 
by their lines. 

14. Transshipment. — Steamship lines solicit not 


only freight destined for points reached by their own 
vessels, but also goods which have to be trans- 
shijDped in order to reach their destination. While 
almost all important seaports are reached by direct 
steamers from some port of the United States, certain 
ports can be more easily reached thru connecting 
services. This involves transshipment at the terminus 
of the direct line. Hamburg and Liverpool are great 
transshipment centers for trade with the outlying 
points of the world. Thus, in the Australian trade 
Liverpool successfully competes with direct steamers 
from American ports. The White Star Line, thru 
its American service, collects freight to be trans- 
shipped at Liverpool into boats belonging to her Aus- 
tralian service. It happens sometimes that it is 
cheaper to send even goods in this indirect way to Aus- 
tralia than by direct steamers plying to that country. 

However, because of the danger of damage result- 
ing from the extra handling and because of the time 
usually lost, transshipment should be avoided when- 
ever possible. Destinations such as the Baltic ports 
or those in the Levant may be reached more expedi- 
tiously by transshipment at Liverpool or Hamburg. 
The advantages of this method are due to the infre- 
quency of direct sailings from the United States to 
such ports. 

Besides the groups discussed here, many others such 
as warehousemen and bankers should be added to give 
a complete picture of the organism which performs 
directly and indirectly the ocean freight service. 

XV— 18 



Describe the charter business and its methods of operation. 

Where is the chief charter market for ships? 

Describe the operations of the ship-broker, and of the seaport 

Explain the operations of the forwarding business. Who are 
the most important factors in it? 

Why are goods transshipped in many cases instead of being 
sent directly to their destination? 



1. Charter and liner rates. — Just as the freight 
service of the ocean carrier is divided into two groups, 
i.e., charter traffic and hne, the charges for these 
services are classified accordingly. As we have seen 
in the previous chapter, the methods of rate-making 
in the charter traffic differ materially from those 
employed in the line traffic. In the following para- 
gTaphs we shall discuss the general nature of ocean 
freight rates. 

There are certain features common to all classes of 
rates charged in water-borne traffic. The first of 
these is the cheapness of water transportation as com- 
pared with transportation by land. It has been stated 
in New York shipping circles that the cost of trans- 
porting one ton of freight one mile by water averages 
only 7/8 of a mill, while by rail the cost averages 8.48 
times as much, or 7.4 mills. It is a peculiar fact, that 
it costs less to ship coal from Cardiff to Port Said 
(3,072 miles) than from the South Wales coal district 
to London (170 miles). The freight charge on a 
shipment of men's shoes from New York to London 
(3,222 miles) is less than the charge for carrying this 
same freight from Chicago to New York (912 miles) . 



.2. Causes of low chai-ges of water transportation. — 
This cheapness of water transportation is largely due 
to the fact that the water carrier has no expenditures 
for purchase, construction or maintenance of road- 
bed. Technical improvements, especially in the con- 
struction of marine engines, and more efficient design- 
ing resulted in a general decrease of freight rates up 
to 1902, and in some cases up to 1908. If we keep in 
mind the fact that the service rendered by steamers 
has improved during the same period, the drop in 
ocean rates on inward voyages from an index number 
of 121.7 in 1884, to 66.6 in 1903 seems remarkable 
indeed. The decrease was less pronounced in the case 
of rates covering outward voyages, but the mean of 
these two classes of rates falling from 116.2 in 1884, 
to 72.8 in 1903, shows a decrease which is far in excess 
of the decline of the general price level during the 
same period. The following table gives a picture of 
this rate development compared with the changes 
in the wholesale prices of the most important com- 

This table is the result of a most elaborate investi- 
gation by the British Board of Trade in 1904. The 
difficulty in arriving at a general ocean freight level 
is easilj'' perceived if one remembers the great variety 
of articles comprised in ocean traffic and the large 
number of ocean routes. The above-mentioned in- 
vestigation covered numerous articles imported into 
Great Britain from IS^orth America, southern Europe, 




Statement showing the percentage fluctuations in mean yearly freight 
rates between the United Kingdom and certain ports abroad during each 
of the years, 1884 to 1903, as compared with mean rates for the year 1900. 
The percentage fluctuations in wholesale prices of commodities are added 
for comparison. (1900 figure equals 100 per cent.) 


Mean of 

Index ;Nunibcr 
of Wholesale 




Prices of 







































SO. 8 





































101. 1\ 

























1 See "Report on Wholesale and Retail Prices" (House of Commons 
Paper, No. 331, of 1903), p. 34. The figures have been converted to the 
basis of 1900 as the standard year. 

the Indian Ocean and Australasia. Also commodi- 
ties exported from Great Britain to Canada and the 
United States, the North Sea and Baltic countries, 
southern Europe, South America and Australasia. 
The chart on page 260 will help to clarify the result of 
these investigations : 

Quite apart from the effect of the European war 



Chart Showing the Percentage Fluctuations in Mean Yearly 
Freight Rates in Certain Trades and Voyages. (1900 Figure 
Equals 100 Per Cent.) 

1884 1886 1888 1890 1892 189i 1896 1898 1900 19021903 




S^ 90 






100 s 




upon freight rates, there was before the war such a 
rise in the general level of ocean rates that little of the 
cheapening has remained permanent. This is evident 
from the chart opposite, taken from appendix 16 of 
"British Shipping, its History, Organization and 
Importance," by Kirkcaldy. 

These figures refer to British freight rates only, but 
this does not lessen their value as illustrations of the 
universal rate level, because of the dominant position 
which Great Britain holds in the carrying trade of the 
world, and also because Great Britain draws her sup- 
plies from practically every corner of the globe. 

3. Rate fluctuation. — These charts, representing 



:)aoo J3d[ §S8SSSSS 






















































































































5 -a 














3 .' 





t :sta 

•tf fe. S 03 























a o 













}uao.iDj§ S 1 8 S e S S 

>ote-Duriug the year 1913, mean homeward, freights dropped to S 


Mean, outward freights drojped to 91. 


as they do general means, reflect only imperfectly the 
wide range of fluctuations which are the second char- 
acteristic of ocean rates to be discussed. The general 
freight level shows only the effect of great events such 
as the British Engineers' strike of 1897, the Spanish- 
American war, the South African war, and so forth. 
The high rates of 1898-9 set shipbuilding yards fever- 
ishly busy. In 1900, the new tonnage flooded the 
market and its effect was accentuated by the release of 
ships chartered by the British government in the Boer 
war. Hence the depression after 1900. The large 
increase in freight rates since 1908, particularly since 
1911, is due to various strikes such as the British coal 
strike of 1911, to the closure of the Dardanelles dur- 
ing the Balkan wars with its effect upon insurance 
rates, and particularly to the abstention on the part of 
British shipbuilders during the preceding period of 

4. Conditions affecting rates. — The nature of the 
charter traflic causes the rates to fluctuate more widely 
than hne rates. Sometimes within a week or two the 
charter rates in a given direction will rise three hun- 
dred per cent. This extraordinary degree of fluctua- 
tion is due to the fact that charter rates depend more 
intimately upon suppty and demand than perhaps any 
other prices that can be named. If a shipper is bound 
by contract to ship a certain cargo at a certain date, 
only the ships that happen to be at hand at that time 
are available ; all other ships, even those that are only 


a relatively short distance away, do not exist as a pos- 
sible supply. This relation between the urgency of 
making a shipment and the impossibility of adjusting 
the supply of vessel tonnage with sufficient prompt- 
ness to the existing demands makes the charter rate a 
marginal rate. That is to say, if the amount of 
freight calling for shipment exceeds the amount of 
vessel tonnage offered, this excess freight, represent- 
ing the margin, cannot be shipped at all. It is, there- 
fore, the fear of the shipper of being left altogether 
without shipping facilities that enables the carrier to 
charge a rate far in excess of that which might have 
prevailed only a few days earlier, in the same locality, 
when the relation between the freight and space was 
a different one. 

Just as the urgent demand of the shipper for space 
at a given time drives freight rates to abnormal 
heights, so the opposite is the case when a steamer is 
embarrassed for a cargo. Here the limitations placed 
on the cheapness of water transportation manifest 
themselves. The boat must be filled, the operating 
costs being the same whether ten or ten thousand tons 
are carried. When, therefore, a steamer has been dis- 
appointed in its expectation of filling up, it will take 
freight for extremely low rates rather than go out half 
empty. It is then said that the boat offers "distress 
room." Such cases occur frequently in the regular 
line business, but are even more common in berth 
traffic. A carrier in his anxiety to fill space left 


vacant by belated interior freight, negotiates for "spot 
cargo," and the shipper, taking advantage of the car- 
rier's anxiety, squeezes out a low rate. 

5. Rate basis not cost of operation. — It seems 
natural that the charges made by those engaged in a 
highly competitive business cannot be based primarily 
upon the cost of the service rendered. Therefore, in 
shipping, the freight charges are only secondarily 
influenced by the cost of operation, the distance 
covered and the time consumed in a given voyage. 
Sometimes freight will be carried at a rate that does 
not exceed the operating expenses. In other cases 
the charges exacted from the trade may seem exorbi- 
tant, the carrier being able to charge "all the traffic 
will bear." 

The distance covered plays a relatively unimportant 
part in the calculations of freight rates, of charter 
rates in particular. The same charges prevail to 
ports which are hundreds of miles apart. We have 
referred in a previous chapter to the so-called "range" 
clauses attached to charter parties, which mean that 
the same freight rates are paid by the shipper whether 
the vessel proceeds to Le Havre or Hamburg, when 
bound for Europe; or to any port between Baltimore 
and Boston, when destined for America. The dis- 
tance from Hamburg to Le Havre is 41.5 miles. 
Such a distance means little when compared with 
such figures as: 

Hamburg to Buenos Aires 6,630 miles 

Hamburg to San Francisco 14,080 miles 


Hamburg to Cape Town 6,495 miles 

Hamburg to Bombay 6,640 miles 

Hamburg to Yokohama 11,710 miles 

Hamburg to Sydney 12,260 miles 

But even the 2,62.5 miles between Hamburg and 
Naples do not hinder the mail steamers from charging 
the same rates on general cargo to Bombay, whether 
the shipment originates at the mouth of the Elbe or 
in the south of Italy. Nor does it make any dif- 
ference whether the shipment is destined to Suez, or 
to Singapore, 5,000 miles farther. Mr. Lawrence K. 
Sherman, Vice-President of W. R. Grace and Com- 
pany, described the situation well when he said : 

Ocean rates are not a question of cost and distance. They 
are a question of competitiAe conditions. The field is wide 
open and j'ou have to make rates that will get the business. 

6. Knot twie. — Generally speaking, the time con- 
sumed on a given voyage depends upon the distance 
covered. Occasionally, how^ever, other factors, such 
as the lower speed required while passing thru a canal, 
or thru narrow or shallow waterways, or calls at inter- 
mediate ports have a bearing upon the time taken up 
in covering a given distance. That the time consumed 
is a relatively small item in rate calculations appears 
from the following statement of Professor E. R. 
Johnson before the Senate Committee on Interoceanic 

I found that for a freight steamer of Q^/) to 10 knots' 
speed, which is the speed at which most freight steamers are 


run, the vessel owner or operator is 10 cents per net regis- 
tered ton per day better off for every day's reduction in the 
time of the voyage. 

So, in the case of a 2,000 ton steamer of this de- 
scription the saving of one day, or of about 220 miles, 
would amount to but $200, a relatively small item 
when compared with the total cost of operating the 

Of course, in the case of high-class passenger vessels, 
representing a capital investment of millions — some of 
the latest boats cost as much as $8,000,000 — the time 
factor becomes much more important, every day eat- 
ing up large sums in interest and amortization. In 
the case of these boats every possible effort is made 
to reduce to a minimum the time of port stays. 

7. Competition. — Operating costs, which are only a 
secondary consideration in the case of tramp steamers, 
enter even less into the question of establishing the 
basis for line rates. R. P. Schwerin, formerly Vice- 
President and Manager of the Pacific Mail Steamship 
Company, was most emphatic in his statement before 
the Committee on Interoceanic Canals that "a liner 
has to exclude all operating expenses in its passenger 
and freight rates" and that "operating expenses do not 
affect the charges of the steamship company at all." 
"At the end of your voyage you simply figure your 
earnings and expenses and this will show whether you 
come out ahead or behind." The expensive steamer 
often competes with the cheap one, but cannot charge 
more for equal service if it wishes to get the freight. 


A good example is the traffic in the Pacific ocean. 
Here expensive American steamers compete with 
Japanese steamers which, besides being often more 
cheaply built and invariably more cheaply operated, 
are subsidized bj^ the Japanese government. That 
government in turn assumes the right to regulate all 
inward and outward rates on the products of Japan. 
It regulates the sailing dates and routes of subsidized 
boats and the rates which these boats may charge for 
export and import cargo, being guided mainly by the 
desire to build up the foreign trade of that country. 
All other boats which compete with these Japanese 
lines have to adjust their rate charges to the standard 
set by the Japanese government. Thus, the factor of 
competition wholly overshadows any regard for oper- 
ating expenses in the determination of rates. Natm*- 
ally, the desire to come out ahead being the prime 
consideration in the steamship business, as in all 
business, the general average of rates charged cannot 
for any length of time fall below the minimum set by 
the operating expenses; but in the individual case 
other factors are of more importance in the setting of 

8. JLoad factors. — In its effect upon the rate level, 
the load factor is almost as important as competition. 
The question whether a vessel can secure a full load 
both ways of a voyage is one which affects rates very 
much more than time or distance. A vessel will 
operate at maximum efficiency and at the lowest cost 
per unit of cargo if it can secure a full cargo each way 


on every trip. The load factor may fall short of this 
ideal in two general ways; there may be enough 
freight in one direction to furnish full loads, but not 
enough in the opposite direction to furnish more than 
partial loads, or the freight may be offered so irregu- 
larly in either direction or in both directions that the 
loads vary thruout the season. The latter condition 
will affect liners more than tramps, as the latter ves- 
sels can always leave a "trade" as soon as it ceases 
to furnish paying employment. 

9. British coal exports and wo?'ld charter rate. — 
Almost the entire British foreign trade in coal, apart 
from that portion which moves to adjacent Conti- 
nental ports, must be viewed in place of ballast as a 
return freight proposition. If it were not for tlie 
British coal exports the tonnage balance of northwest- 
ern Europe would be a passive one; i.e., the amount of 
imports going to northwestern Europe would far 
exceed the amount of the exports. This discrepancy'' 
would be even greater, for the reason that the different 
nature of the exports and imports calls primarily 
for line tonnage outward and for tramps to carry 
imports. The British coal exports, changing this 
passive tonnage balance into an active one, solve the 
problem admirably. The hundreds of tramps which 
are employed bringing grain, nitrate, ore and other 
bulky commodities to London, Rotterdam, Hamburg 
and many other ports in that part of the world would 
have to go out empty if it were not for the British, 


and in recent years to a very much smaller extent, 
the German export of coal. 

As it is, the steamer which has just discharged a 
cargo of Indian jute at Hamburg, and which has been 
engaged to call for a cargo of Argentina wheat at 
Rosario, can always rely on an outward cargo of 
British coal. The coal is carried as a ballast cargo. 
The transportation of coal is therefore largely a mere 
side issue of the shipping business. This is clearly 
reflected in the freight rates charged for the carriage 
of coal. The grain exports of Argentina may again 
serve as an illustration. During summer months in 
the North, when grain shipments from the southern 
hemisphere are dull, the rate on coal from Cardiff to 
Buenos Aires is fairly high. But as the harvest 
proceeds, and Argentina grain shipments grow in 
volume, the coal rate will drop almost as much as the 
grain rate will rise. The following table serves to 
illustrate this. It covers onty that half of the year 
when grain shipments from Argentina are relatively 
small. When the season is in full swing, ships from 
all parts of the globe flock to Argentina, so that the 
reflex action of the coal and grain trade on each other 
does not then appear so evident. 

10. United States coal exports, — It has been sug- 
gested that this country should imitate the example of 
England in building up a coal export trade which 
reaches almost every corner of the earth. Before the 
House Committee on JNIerchant JNIarine and Fisheries, 



Wheat Freight 

Coal Freight 

Wheat Freight 

Coal Freight 


La Plata to 

Cardiff to 


La Plata to 

Cardiff to 


La Plata 


La Plata 


s. d. 

S. d. 

s. d. 

s. d. ■ 



13 6 

13 3 

October. 2 

16 6 

10 6 


11 6 

12 1034 


16 6 

10 6 


10 6 

13 9 


16 — 

10 — 


9 6 

13 6 


17 — 

10 — 


7' ^ 

— — 


16 6 

9 6 



10 6 

— — 

November 6 

15 ,— 

9 — 


13 — 

12 6 


15 — 

8 — 


15 — 

12 — 


17 — 

8 3 


17 — 

12 — 


17 6 

7 1 

September i 

18 — 

11 — 

December 4 

17 6 

8 — 


16 6 

11 ^ 


18 _ 

8 — 


16 6 

11 _ 


18 6 

7 6 


16 6 

10 6 


— — 

— — 

^ "Die britische Kohlenausfuhr" Essen 1911, Erich W. Zimmerman. 

during the recent hearings concerning the creation of 
a shipping board, a proposal was made for the devel- 
opment of American coal exports to Argentina. 
At once the difficulty presented itself that little or no 
freight could be taken back. Meat from La Plata 
can not use the same boats that cany coal. It re- 
quires better quarters. Coal could be carried in the 
boats bringing hides, wool and corn, but south-bound 
these boats are alreadj^ more than filled with general 
cargo from the United States. With this in view, a 
triangular voyage was suggested; American coal to 
Argentina, Argentina grain to England and — here 
was the difficulty — in ballast from England back to 
the United States. Perhaps in the future this coun- 
try will have to supplement its own wheat production 
by imports from younger countries like Argentina. 

11. Triangular voyages. — The discrepancy in the 
volume of commodities moving over the same route 


but in opposite directions, as illustrated by the figures 
given above to show the relative weight of exports 
and imports of the United States, often makes it 
necessary to arrange so-called triangular voyages. 
The ships of the United States Steel Products Com- 
pany, already described, installed in the Vancouver 
service, take as a return cargo lumber or copper matte 
for Dunkirk, France, and in France they take on 
chalk for New York. This triangular voyage occu- 
pies from seven to eight months. 

12. MiiVed cargo as a rate-making factor. — An im- 
portant consideration which affects the rate policy of a 
steamship line is the desire to secure a load which uses 
the ship's space with maximum economy. We have 
seen that a mixed cargo is better than a homogeneous 
one. Among the manifold classes of general freight 
are some which "weigh more than they measure," 
others which "measure more than they weigh." The 
steamship line wishes to have a certain proportion of 
these two classes so as to be able to fill the ship 
economically. It uses its rate policy to bring about 
this effect. R. P. Schwerin, in his testimony before 
the Senate Committee on Interoceanic Canals, re- 
ferred to this when he said: 

Naturally we would go after the package or best paying 
class of freight first and estabHsh a service of volume and 
regularity that would take care of all the freight offering; 
we would hold up our rates as high as consistent with the 
filling of our ships with the class of cargo that we wanted 
and at times reduce it to induce movement of tonnage in 
case there was a shortage. If too much freight were offer- 

XV— 19 


ing we might raise the rate on iron in order to take a larger 
portion of general merchandise. If general merchandise 
were not offering we might lower the rate on iron to fill the 
ship. This is the general policy pursued. 

The following table prepared by H. A. Boas of the 
New York office of the Hamburg- American Line, 
illustrates how to fill a vessel with two classes of cargo 
so that she is full and down to her marks : 

Vessel 5,000 tons freight-carrying capacity ; 

275,000 cubic ft. freight-carrying capacity. 

To fill with copper measuring 9 cubic feet to the ton and lum- 
ber measuring on an average 100 cubic feet to the ton. 
Let X equal weight of copper 
Let Y equal weight of lumber 

X plus Y equals 5,000 

9X plus lOOY equals 275,000 

9X plus 9Y equals 45,000 

9X equals 45,000— 9 Y 

45,000— 9Y plus lOOY equals 175,000 

91Y equals 230,000 

Y equals 2,527.5 

X equals ^,472.5 

2,472.5 tons of copper equals 22,152.5 cubic feet 

2,527.5 tons of lumber equals 252,750. cubic feet 

274,902.5 cubic feet 
275,000 equals total frt. room 

13. Rate quotations. — As the variety of commodi- 
ties carried by steamships grew, it became desirable 
to improve the original and unscientific methods of 
quoting rates for each single article. 

A nmnber of causes have led to this change. One 
of them was the competition of railroad-owned steam- 


ship lines, which naturaly applied the scientific rate- 
making practiced in their inland service water-borne 
traffic. Another cause was the increase in com- 
petition among shipping companies, who vied with 
each other to conquer the rich transatlantic trade 
with this countiy. This struggle led them to quote 
their rates in a manner familiar to, and therefore more 
easily understood by the American public. 

However, as yet the classifications that have been 
introduced are rather broad and imperfect. No uni- 
formity exists as yet. Such tariffs as exist in the New 
York trade, governing shipments to Europe, South 
Africa, Australia, New Zealand, China, Japan and 
the Orient generally, or to Brazil and the River 
Plata, "are jealously kept back of the counters of the 
steamship companies." It is a question whether the 
present chaos will ever be replaced by as complete a 
system as governs railroad traffic, but surely great 
improvements may be hoped for in the future. 

14. Effect of tramps on line rates. — Tramps affect 
line rates in a twofold way, as there are two cases 
where their services meet. One case is when the liner, 
in order to fill space, carries bulk goods such as grain 
and ore, which are the natural tramp cargoes. The 
other case is the reverse and arises when the tramp is 
"put on the berth" to compete with line space for 
general merchandise. Such competition is lessened 
by the method of granting deferred rebates, by which 
lines tie the shipper permanently to themselves, a 
practice to be discussed later. It is illustrated by the 


agreements which the raih'oads serving the ports of 
the Atlantic seaboard have with the steamship lines. 
New York and New Orleans are free from such rail- 
road agreements, and therefore in them the competi- 
tion of the tramp and the liner is stronger. 

One of the most vital questions in regard to rate- 
making is the difficult task of determining what con- 
stitutes a "reasonable rate." This involves, accord- 
ing to Professor S. S. Huebner, a study of: 

(a) The factors that influence the rise and fall of the 
general level of rates. 

(b) The difference in the nature of the service rendered 
by liners and tramps. 

(c) The character of the vessel and the expenslveness of 

(d) The stability of rates over a long period of time, 
charter rates fluctuating much more violentl}^ 

(e) The diff^erent conditions surrounding each trade route 
as regards the nature of the service, the quantity of the 
cargo, and the opportunity for eff'ecting combination car- 

(f) What constitutes a fair profit to the line, all factors 

15. Rates and the European *war. — The effect of 
the European war on ocean rates offers a most inter- 
esting study in so far as it illustrates, as no event of 
past history ever did, the extent to which rates are 
influenced by the law of supply and demand. But 
after all, the conditions which now are completely 
thro^vn out of their usual order into a state of chaos 
will return to a normal state of affairs, proving the 
temporary nature of the present situation. And we 






p p p p p p 

« W ° CO.C5 OT 

o o o o o o 

s' g' g ^ g § 

o o 

O lO 

«0 CO 


o o o o 

1 g" g § 


r1 rH rH ,-1 ri 


o o o o o o 

gi' g§ S S S' g^ 

o o o o o o 

o o o 

o o o o 



°. => P . 
lo' ui LO 4 



t^ 1^ t-; r-- 1-- t-. 

04 IM 9) IM <M e4 

t- t- b- p P p 

S S N §S ?? cJ 

p p 

o to » to 

"M (N 

>n d 

to to CO 03 c» 



"* "*. "t ^ 't t 
^ ^ M S ^ ^ 

-f ^ -*• » CD O 

s' si Si ^ gi §? 

O 05 
00 CO 

CO ■* 

St ei ot 0) 

§• s' s §■ 

N <N p p 

S S C5 







lO >o fi o o o 

g^' g' g3' S ^ S 

o o o o o o 
S 2 S' g? 5§ ^' 

o o 




p p p p 

to S S lO 

p p p p p 

S S CO s 




o o o o o c 
CO Ol' oj ^ o o 

o o o o o o 

s s g s s-i §■ 

o o 



O O o o 

g § g § 


§ S 3 g 1 




o. o o o o p 
-*' (Nf ei <-< o o 

o o o o o o 

£5 2 § 5J si S 

- o o 


o o o o 
lo d iQ d 
tK tH -s .»< 






o o o p p o 
irj cii CO (r3 rJ r-5 

o o o o o o 

o d 

o o o o 
15 \n d .0 

T? ^ O -* 


10 d in o d 
■w >.o to t- CO 





^ p <N >ra o 'H 
CO i4 t- ;d CO ^ 

-^ p p -* (N 
;c I- t-i 00 0.5 


CO o o «5 in CO 
»n -^ -si CO CO CO, 

lO o o ^ 


m LO 10 
g? 5§ ^ S *c^. 



rt ,-1 p o in p 

.* .* CO (N (M CO 

T ^ r^ -H IN <N 

lO in ift ^t-^ ^ -^ 



..* W -* 1-H 
<M 04 CO M 

CO CO «n to 

to S3 t- 

-^ '2 

^r -^ LO 



O t-H >-i l-O lO O 

-.j; ■* ■* CO CO CO 

LO ^ to ^ e-j 0.J 

CO O 50 .t4 CO o 

. .-1 OM 



S §i Si S 

d -^ to d 00 

(N 0^ CO -Jt CO 

to to i- 


r^ !- i-- ;i! <M o 

r: ^ o c^ t- lo 

Ol «= 


CO ^ C.I 

t- -f CQ L- -r 

CO U5 I" ' 


3 3 g- -J O O 
^ <J t^ o« P 

C .2 



fcb -S .„• > u 

>-: Ph »=i 


are here concerned not with temporary conditions, but 
with the underlying principles, the gi-eat laws that 
govern shipping in normal times. 

However, in order to illustrate the effect of the war 
on ocean freight rates, the table on page 275 is pre- 


Describe the low rates for ocean freight and the differences 
between charter rates and line rates. 

What have been the main directions in the rate changes of re- 
cent years? 

What causes temporary changes in rates at any given time 
and place ? 

What is the general basis of freight rates? 

How does the character of the cargo in the opposite directions 
affect the rates? 

Why are triangular voyages made? 

Describe how the most desirable proportions of cargoes of 
different merchandise are obtained. 



1. Regulated versus wild competition. — It has 
already been shown that the freedom of the seas is the 
fundamental factor controlling and determining 
ocean rates. Statements such as that of Mr. Rufus 
Hardy before the Committee on the Merchant Marine 
and Fisheries, that "the day of competition on the 
ocean is gone, that combinations had taken its place, 
that all laws against combinations are futile in that 
respect, and that the time had now come to recog- 
nize combination and regulate it," should be taken 
with a grain of salt. It will be shown that many 
agreements do exist between former rivals, and that 
in rare cases competition has actually been replaced 
by combination. But it is also true that competition 
in rate-making has been replaced by competition in 
service, and that as yet no combination has been 
found strong enough to overcome the force of com- 
petition innate in the nature of shipping. The slogan 
is not "combination versus competition," but "regu- 
lated, versus wild competition." 

2. Government investigations. — Careful investiga- 
tions carried on by the governments of both this coun- 



try and Great Britain have revealed the nature and the 
scope of almost all existing shipping rings, confer- 
ences, pools and other agi'eements. In the United 
States the investigation of shipping combinations, 
carried on in 1913 by the House Committee on the 
Merchant Marine and Fisheries, showed that the ad- 
vantages of shipping combinations are greater than 
their drawbacks. It was found that, contrary to pop- 
ular belief, shipping combinations were not confined* 
to American trade, but were universal in their nature. 
Nor is their aim necessarily directed against the inter- 
ests of the United States. In an address to the Na- 
tional Foreign Trade Convention at Washington, 
June 13, 1914, Mr. P. A. S. Frankhn of the Inter- 
national Mercantile Marine Company, said: 

A fallacy which I should like to expose here is the con- 
tention that the foreign lines are seeking to throttle Ameri- 
can export trade. On the contrary, I am confident the for- 
eign lines are doing everything possible to encourage our 
trade, which it is, of course, to their best interest to do, even 
to the apparent detriment of the merchants of the foreign 
country to which the steamers happen to belong, as the ship- 
owner has to be supported by, and make a living out of, his 
particular trade. If rates should be unduly advanced, the 
foreign buj^er, who pays the freight, would decline to pur- 
chase our products. The safety valve against the charging 
of exorbitant freight rates is in reality the lines' own in- 
terest to do everything in their power to foster trade, and to 
do nothing which would have a tendency to restrain it. 

3. Tramp vessel combinations. — The government 
investigations referred to above brought out with 
striking clearness the fact that no combination of last- 


ing influence and large scope can exist among tramp 
vessels. To organize the numberless tramps whose 
ownership is scattered among hundreds of individuals 
and companies, is an impossibility. Tramps are 
quickly built. A broker will soon find cargoes and, 
by shghtly cutting the rate, the new competition will 
secure abundant and profitable employment, leaving 
idle the boats which, bound by their agreement, must 
charge the higher rate. 

It is not lack of experience in cooperation which 
stands in the way of successfully bringing together 
owners of charter vessels. Many associations formed 
to protect their mutual interest manifest their will- 
ingness to cooperate and show their possession of 
the necessary esprit de corps. But every attempt to 
control charter rates has proved futile, in spite of the 
strong feeling of solidarity which prevails among large 
groups of tramp owners. 

4. Examples of charter vessel combinations. — 
Several attempts have been made at such rate control. 
Whenever a serious depression befalls the shipping 
industiy, the desire to raise the rate level to a profit- 
able height by concerted action is naturally strong. 
Thus, the formation of the "Saihng Ship Owners' In- 
ternational Union," with headquarters at London, was 
largely a result of the slump in the general rate level 
which occurred after the extraordinary boom caused 
by the Boer war. A secondary factor was the large 
subsidies which the French goverment, unlike other 
governments, was granting to the sailing ship owners 


of that country. The union was organized in 1904, 
and in 1905 the tonnage interest covered by the union's 
agreement represented as much as 87 per cent of the 
British, French and German saihng tonnage. Yet in 
spite of this large membership, the work of the union 
met with but Httle success. 

The scope of the union was limited, (1) to mini- 
mum rates; (2) to certain long voyages; (3) to 
voyages homeward to Europe only; (4) to vessels of 
certain size only; (5) to sailing vessels only"; i.e., to 
vessels which today do probably no more than five per 
cent of the work of ocean transportation. 

Still more restricted in the scope of its activities is 
the "Baltic and White Sea Conference" which was 
organized in 1905 in Copenhagen. It does not 
attempt any rate control whatsoever, but confines 
itself completely to matters pertaining to uniform 
charter parties and standardization of measures. 

The two examples given are the most conspicuous 
efforts of cooperation among tramp owners, and even 
they serve to illustrate the impossibility of efficient 
tramp organization, rather than the reverse. How 
this large and uncontrollable element of charter vessels 
reacts upon the line traffic, was set forth in the fore- 
going chapter. It represents a constant menace to, 
and limitation of, any great controlling agreement and 
conference of lines. 

5. Liner cooperation. — There are many reasons 
which render rate conti'ol and intensive cooperation 
among liners easier and more practicable than like 


attempts in the charter traffic. The liner represents a 
much larger unit than the tramp vessel; this means 
that the cost of duplication is greater. High-class 
liners offer fast service and passenger accommoda- 
tions; for this business tramps cannot come in and 
compete. The liner traffic, furthermore, shows a 
greater concentration of ownership; the smaller the 
group of men which controls a certain trade, the more 
easily can this trade be efficiently organized. Another 
important consideration arises from the fact that the 
tramp which has demoralized freight rates in a given 
trade, thanks to its freedom from route restriction, 
can escape punislmient by fleeing the scene of ac- 
tion, while the liner "must stay in the water it has 
troubled, and suffer the consequences of its deed." 

Rate cutting in the liner traffic in most cases leads 
to costly rate wars in which both sides lose heavily. 
The privacy of the individual negotiation which fixes 
the charter rate, as opposed to the publicity ruling 
among liners, makes rate cutting easier for the tramp. 
But while it is thus evident that agreements among 
liners are more easily made than in the charter traffic, 
it would be wrong to underestimate the difficulties 
confronting those who organize steamship line agree- 
ments. The limitations resulting from these difficul- 
ties lie more in the scope of activity of, and the degree 
of control exercised by, individual conferences, than 
in the number of existing agreements. 

6. Agreements in United States trade. — The re- 
port published by the United States House Commit- 


tee on the IMerchaiit Marine and Fisheries (February 
1914), shows that it is the ahiiost universal practice 
for steamship Hnes engaging in the American foreign 
trade to operate both on the inbound and outbound 
voyages under the terms of written agreements, con- 
ference arrangements, or gentlemen's understand- 
ings. This principal purpose is the regulation of 
competition thru either, (1) the fixing or regulation 
of rates; (2) the apportionment of traffic by allot- 
ting the ports of sailing, restricting the number of sail- 
ings, or limiting the volume which certain lines may 
carry; (3) the pooling of earnings from all or a por- 
tion of the traffic ; or ( 4 ) meeting the competition of 
non-conference lines. It was found that eighty such 
agreements or understandings, involving practically 
all the regular steamship lines operating on nearly 
every American or foreign trade route, were in ex- 
istence. It would be wrong, however, to assmne that 
in the case of the foreign trade of this country agree- 
ments are more numerous or more noticeable than in 
other parts of the world. As a matter of fact, long 
voyages furnish a better field than the transatlantic 
trade for the establishment of rate-controlling com- 
binations. Long voyage trades are usually more ex- 
pensive and require less frequent sailings, thereby 
reducing the number of participants in the service. 
So it is only natural to find shipping trusts, rings and 
conferences more firmly established, and in larger 
numbers, in the trade with the Antipodes than in the 
transatlantic traffic. 


9. Important ship combinations in United States. — 
The following are the most imj)ortant combinations of 
ocean carriers operating to and from ports in the Uni- 
ted States, whose existence was revealed by evidence 
produced before the Committee referred to above: 

(1) The North Atlantic Freight Association, com- 
posed of the Allan Line, American Line, Anchor 
Line, Canadian Pacific- Atlantic Coast Lines, Cunard 
Line, Dominion Line, Donaldson Line, Canadian 
Northern (Royal Line) and the White Star Line; 

(2) Agreements as to North Atlantic passenger 
traffic include, in addition to the lines just named, the 
Hamburg American Line, the North German Lloyd, 
and the Red Star Line; (3) The Baltic Pool, com- 
posed of the Wilson Line, the Hamburg American 
Line, the North German Lloyd, and the Scandi- 
navian-American line. 

The trade between the United States and India is 
controlled largely by a conference between the Hansa 
Line and the American-Indian Line. The Japanese 
conference included the Pacific Mail, the Canadian 
Pacific Line, the China Mutual, the Great Northern, 
the Bank Line, the Ocean Steamship company and 
three Japanese lines — the Nippon Yusen Kaisha, the 
Osaka Shosen Kaisha, and the Toyo Kisen Kaisha. 

8. South American trade. — The trade with South 
America is controlled largely by two conferences 
managing the lines plying to ports of the east Coast ; 
the American Brazilian Conference, and that covering 
the River Plata service. The former includes the 


Prince, the Lamport and Holt, the Hamburg- Ameri- 
can Line and the Hamburg-South American Com- 
pany. The latter consists of the Prince, Lamport 
and Holt, the Houston, the Barber and the Ameri- 
can-Rio Plata lines. The west coast of South Amer- 
ica is not controlled by a conference; however, rates 
in that trade are maintained, altho no definite agree- 
ment exists. 

The Royal JNIail, the Hamburg- American, Atlas, 
and the Royal Dutch West India Mail, operate the 
trade with Jamaica under an agreement to which the 
United Fruit Company tacitly adheres. 

In the trade of the Caribbean Sea, the Royal Mail Steam 
Packet Company and the Hamburg-American Atlas Line 
have a pooling arrangement both as to freight and passen- 
gers, while the United Fruit Company, tho not a party 
to the agreement, maintains the other companies' rates, as 
does the Government's Panama Steamship Line so far as 
trade with the Isthmus is concerned. 

An agreement between the Union-Castle, Bucknall, 
Clan, Hansa, Houston, and Prince Lines, governs the 
business between New York and South Africa. 
Finally, the Australian trade is carried on by agree- 
ment between the L^nited Tyser, American and Aus- 
tralasian, United States and Australasian, and White 
Star Lines. 

9. Conferences and pools. — The combinations ex- 
isting between shipping lines may be divided into two 
distinct groups — conferences and pools. Of these 
the jDool is the higher form of development. While a 


conference can exist without a pool, a pool cannot 
exist without a conference. A conference may be 
merely a "gentlemen's agreement" calling only for 
occasional meetings of the interested managers, to 
discuss questions of administration, forms of bills of 
lading, methods of receiving and delivering cargo, etc. 
In other cases, however, the agreement is based upon a 
firmly binding contract, which is executed in writing, 
signed and sealed, "visiting severe penalties on any 
of the heavily bonded signers who may violate its 

The pool is merely a corollary of the conference. 
PooHng, when applied to steamship lines, involves the 
payment of some part of the freight or passage money 
into a common fund. This fund is later divided 
among the partners, according to a scale agreed upon. 
The pool does not necessarily kill the desire of the 
member line to carry as large a portion of a given 
trade as possible, but it usually obviates the scramble 
for a most favorable position, which often leads to 
irregularity as to sailing dates, ports of call, etc. 
Should a pool member not carry his share of the joint 
tonnage without aid, he would have his quota of the 
earnings of the pool reduced. 

10. Administration of pools. — The form and ad- 
ministration of pools differ materially according to 
the various kinds of trades. In its simplest form the 
pool has to do with merely one, two or several articles 
of the cargo carried. In its more elaborate forms 
the pool not only divides the money received for the 


carriage of freight or passengers, but also the traffic 
itself, so that a reasonable relation is brought about 
between pooled earnings and service performed. Un- 
der such circumstances the j)ool works with consid- 
erable fairness, especially when the cost of operating 
the individual steamer is also taken into considera- 

11. Immigrant traffic pools. — The most powerful 
pools were those established in the transatlantic im- 
migrant traffic. This is the most desirable portion of 
the trade between America and Europe. Here the 
North German Lloyd and the Hamburg-American 
Line, for instance, divided the steerage traffic into al- 
most equal portions, the North German Lloyd re- 
ceiving 53 per cent and the Hamburg- American Line 
47 per cent of the total handled by the two lines. By 
so-called "control stations" the Russian and Austrian 
borders are effectively controlled and the immigrant 
traffic is segregated in groups for Bremen and Ham- 
burg in accordance with the pool agreement. Other 
pools involve freight earnings, and still others cover 
cabin and steerage traffic. 

12. Conference advantages to shippers. — The ad- 
vantages and disadvantages of steamship conferences, 
as seen from the viewpoint of both the ship-owner and 
the shipper, have been carefully analyzed by the ex- 
pert adviser of the United States House Committee 
on the Merchant Marine and Fisheries, t'rofessor S. 
S. Huebner. We shall give here merely a short sum- 
mary of Professor Huebner's statement : 


Agreements are said to have resulted in improving 
the service rendered by the steamship hnes. These 
improvements consist mainly in greater regularity and 
increased number of sailings and in the instalment of 
faster and safer vessels. Greater regularity brings 
to the shij)per several advantages ; he needs less stock, 
does not have to engage cargo space long in advance 
and can enter forward contracts for the delivery of 
his goods at a definite date. The greater speed and 
safety of the vessels bring lower insurance rates and 
reduce the loss of interest on the cargo while in transit. 

Stability of rates over long periods of time is the 
next favorable result of steamship conferences. The 
speculative risk which exists under the system of open 
competition is eliminated. It enables the shipper and 
merchant to calculate to a nicety this element of cost. 
Three factors assure the shipper reasonable rates: (a) 
lines can not afford to charge rates detrimental to 
the development of the traffic; (b) competition of 
lines serving the European merchant between the 
same ports to which American shippers trade, serves 
as a constant check on rates from America; (c) 
tramp competition holds down liner rates. 

13. Rate charges and rate wars. — It is further 
claimed that the conference establishes uniform rate 
charges, the small shipper being treated in the same 
way as the big one. Under the system of open com- 
petition the powerful shipper could play one line 
against the other and thereby obtain preferential 
rates. The conference, on the other hand, has no spe- 

XV— 20 - ^ 


cial interest in showing favors to big shippers, espe- 
cially in cases in which earnings are pooled irrespec- 
tive of the amount of business done by each line. 

The rate wars common under open competition 
often result in the survival of the strongest and in the 
elimination of the weak lines; but agreements, par- 
ticularly pools, tend to compensate weaker members 
for their inability to obtain a large portion of the more 
remunerative trade. 

One of the most important advantages of the con- 
ference system is the fact that rates from the United 
States to a foreign port are maintained on a parity 
with the rates from other countries. For example, 
in normal times rates from New York to Rio are the 
same as those from Hamburg or Liverpool to Rio. 
This is the more remarkable in view of the fact that 
the European trade is said to be considerably more 
valuable to the lines than the American trade, because 
the former contains a larger portion of high-class 
package freight and affords better opportunities to 
obtain retui'n cargoes. 

14. General advantages. — While the standard of 
service rendered by the conference lines has improved, 
certain reductions in the cost of service, made pos- 
sible by the conference, are said to result in an ulti- 
mate reduction of freight rates. Wasteful competi- 
tion is eliminated, and the aggregate cost of the serv- 
ice rendered by all the lines is accordingly reduced. 
Furthermore, the cost of service can be more econom- 
ically distributed so as to develop the trade. Rates 


may be reduced on certain articles, compensation be- 
ing found in increasing the rate on other items. Lines 
can view the trade "not only as it is, but also as it may 
become." Ports can be developed which otherwise 
would be neglected. 

Judge Alexander, who presided over the Shipping 
Investigation, summed up the situation in a recent 
report with the words: 

Steamship line representatives, as well as the patrons of 
the lines were almost a unit in emphasizing to the committee 
the importance and necessity of the aforementioned advan- 
tages of agreements and conferences. 

In fact, it was openly claimed that these advantages 
far outweighed the following disadvantages. 

In the first place, the monopolistic nature of the 
steamship-line combinations is attacked. It is said 
that all combinations of private enterprises containing 
the germ of monopoly are apt to abuse their power to 
the detriment of the public ; the primary aim of confer- 
ences being to prevent the establishment of other lines 
in a given trade. In so far as "fighting ships" are 
used for the accomplishment of this aim, the shippers' 
contention finds support in the courts. These fight- 
ing ships are sent by the combination to take away 
the business of an uncontrollable competitor. They 
dock next to the competitor's ship and take freight at 
a lower rate than he could afford to grant. AVhen the 
United States brought suit against the Hamburg- 
American Line and other foreign steamship lines, at- 
tempting to "break up an alleged combination of 


European ship-owning lines," the court refused to 
grant the principal relief asked for by the govern- 
ment, but granted a relief against fighting ships. 

15. Shippers ohjectiofis to combinations. — The 
fear is expressed that altho the monopoly of the lines 
may be limited at present, the combinations will be- 
come more powerful in the future and will gradually 
gain complete control over their specific area. 

Shippers further object to the secrecy of most 
steamship agreements, especially to the refusal of the 
lines to publish their rates and tariffs.^ 

In some cases it is claimed the lines have arbitrarily 
increased rates without giving the shipper due notice 
in advance. Shippers also argue that not all lines 
adhere to the principle of treating all shippers alike. 

Strong opposition is voiced against the deferred 
rebate system. Under this system the line agrees to 
refund to the "loyal shipper," i.e., the shipper who 
patronizes the line exclusive^ with all his shipments 
in a given direction, a certain portion of the freight 
charges, usually five to ten per cent. This rebate is 
paid after periods of considerable length, in some 
cases as long as twelve months, and is called a "de- 
ferred rebate." The system has been practically done 
away with, as far as the outward American trade ^ is 

1 In Canada, the Railway Act compels any railroad which "owns 
charters, uses, maintains or works, or is a party to any arranging for 
using, maintaining or working vessels for carrying traffic by sea or by 
inland water" to file its tariifs with the Board of Railway Commis- 

- In 1913 the Steamship Conference advised Sir Harry Drayton, 
Chairman of the Canadian Board of Railway Commissioners, that the 
so-called loyalty provision under which a charge of 10 per cent was 


concerned, owing to the institution of suits by the 
United States Attorney- General under the Sherman 
Act. In other trades the system is still in vogue. Its 
general significance appears from the following find- 
ing of the British Royal Commission on Shipping 
Rings : 

That a conference making use of the system of deferred 
rebates possesses, so far as the shipper of general merchan- 
dise is concerned, a limited monopoly, and that this monopoly 
is dependent upon the system of deferred rebates, or some tie 
equally effective. 

It is said that if we take the deferred rebate away 
from the conference, "the existence of conferences de- 
pends entirely upon affording the shi^jper satisfactory 
service and a reasonable rate." But even where the 
rebate system exists, the lines are not so powerful as 
it may seem, since they are constantly exposed to the 
danger of tramp competition. 

The claim that conferences aim to kill off competi- 
tion is probably true. But experience shows that 
they rarely succeed. Fights between lines are very 
costly and mean an enormous amount of work and 
worry. Therefore, they are avoided when possible. 
Where the lines have fought they have usually met 
with defeat and have been forced to agree to the 
admission of the new line. 

16. New lines. — The New York-Caribbean trade 
affords an interesting example of the relation of ex- 
made for primage and rebated in six month periods to all shippers who 
shipped no freight except by Conference Lines, had been withdrawn 
from then- tariffs in so far at least as Canadian Atlantic trade was con- 


isting conferences to new lines. Until the end of the 
last century the Atlas Line, an English corporation, 
was the only company offering regular service in 
this trade. Owing to an over-conservative manage- 
ment, which was rather old-fashioned in its methods, 
the company made little headway. The Hamburg- 
American Line, realizing the opportunity presented 
to it, purchased the company, modernized the 
service, and within five years was in a position to 
show considerable profit. At that time the Royal 
Mail Steam Packet Company started a competitive 
service which led to a desperate rate war between the 
two rivals. This ended, after two years of struggle, 
with an agreement between the two companies which 
gave each its "place in the sun." It was the United 
Fruit Company which, by changing its character from 
a private line to that of a common carrier, threatened 
to disturb the balance of power. Realizing the 
strength of the newcomer, the German and the Brit- 
ish lines decided to take the United Fruit Company 
into their confidence, preferring to share the profits 
rather than to risk losing them in a hopeless rate war. 

17. Combinations among steamship lines in the 
Canadian trade. — All the regular lines sailing to and 
from Canadian ports are members of the different 
shipping conferences. The influence of these rings 
on Canadian trade is similar to that on United States 

There is a difference, however. Very few tramp 
steamers are engaged in carrying Canadian goods. 


In the grain trade for instance, it has been shown 
that 50 to 60 per cent of the grain from Canadian- 
Atlantic ports is ordinarily transported in passenger 
ships, only five per cent in tramp boats and all the 
I'est in cargo liners. The tramp steamers exercise 
at best only a sporadic competition, which affords no 
protection whatever to shippers requiring regular 
shipments in less than cargo lots. 

18. Evidence before Commission of Investigation. 
— In 1913 the complaints of Canadian shippers and 
trade organizations cuhninated in a demand upon the 
government for relief, either thru the control of rates 
or by other radical methods. The result was the send- 
ing of Sir Harry Drayton, Chairman of the Board 
of Railway Commissioners, to the United Kingdom 
to confer with the British Board of Trade as to the 
possibility of empowering a joint Commission to in- 
vestigate the whole question of ocean rates and 
charges. As a result of these conferences, the whole 
matter was referred to the Dominion's Boyal Com- 
mission, whose report has not yet been made public. 


To what extent, and when, do combinations in ocean traffic 

What is the probability of a combination among the owners 
of tramp steamers? 

Describe the shijDping conferences and pools which existed be- 
fore the European war among vessels in the New York trade. 
Distinguish between a conference and a pool. 

What advantages are found in steamship agreements? 

Why do shippers object to shipping agreements? Discuss the 
validity of their agreements. 

To what extent is the tramp a competitive factor in Canadian 
trade ? 



1. Nature and function of a jJort. — Professor Ed- 
win J. Clapp describes the nature and functions of a 
great seaport as follows: 

A great seaport is a country's right hand extended to for- 
eign lands offering them its products and requesting theirs. 
It is the focus of a variety of communications ; ocean steam- 
ship lines engaged in the coasting and the foreign trade, 
inland water ways and railways. Its function is to bring 
these lines into contact and to enable them, with the least 
possible friction and loss of energy, to effect the exchange 
of their burdens. In a seaport are knit together the bonds 
that unite the nations in an ever increasing complexity ; the 
seaport is the highest expression of that new phenomenon of 
the nineteenth century — worldwide trade. It is the great 
clearing house for the material goods of international com- 
merce. It is the heart of a country's commercial hfe, draw- 
ing off the sluggish flow of surplus inland production and 
sending back thru the arteries of traffic the life-giving cur- 
rents to foreign trade. 

The seaport, in its broader sense, is the most important 
part in the mechanism of foreign trade. It is more than an 
interesting device, it is a living organism, or rather, an essen- 
tial part of that organism which we call the state, and has 
a vital function to perform. Its function is to call into life 
and handle the streams of foreign commerce and coastwise 
trade, to find for farms, mines and factories the markets and 
sources of foreign supply that they need, to organize and 

develop coastwise domestic trade. It is a function that is 



of increasing importance as the commercial bond uniting na- 
tions becomes closer, the national and international special- 
ization of production more complete, the volume of interna- 
tional exchange greater, and the competition on the world's 
markets more severe. 

2. Value of seaport to community and 'liinterland" 
— A location on the coast has many advantages for 
the community: (a) concentration of merchandise 
and traffic; (b) consequent cheapening of many raw 
materials; (c) removal of many industries from the 
interior to the sea border. There are other lesser 
benefits to the port. In providing for coal, provi- 
sions, wharfage, pilotage, towing, etc., water carriers 
give employment to many lighterage and cartage 
enterprises, and their passengers need hotels and 
boarding houses. Finalh^ the warehousing and the 
banking business also benefit greatly from the concen- 
tration of industry at a seaport. 

The prosperity of all these classes is reflected thru- 
out the country at large, particularly in its hinterland, 
or interior. The interior may derive even greater 
benefit from the service of the seaport than the sea- 
port itself. Thus, interior New England sends or re- 
ceives three tons of freight thru the Boston gateway 
for every ton transshipped there to the port itself, 
thus getting three-fourths of the direct advantage of 
every Boston steamship service for everj^ one-fourth 
that Boston retains. This indicates the true relation- 
ship between the seaport and its hinterland. 

3. Four classes of points. — The port as the terminal 


of the ocean route comprises three distinct parts: 
the channel from the sea, the harbor proper, and the 
facihties for receiving and forwarding traiBc. This 
classification covers merely the physical equipment of 
the port. According to Dr. Kmory R. Johnson, ports 
may be divided into four classes: the roadstead, 
the natural bay, the river port, and the combina- 
tion of river and bay port. Among ports of the 
first type are Dover, England, and San Pedro, Cal- 
ifornia. Here the governments, by constructing 
breakwaters and by dredging the basins inclosed by 
the breakwaters, have created artificial harbors. Nat- 
ural bay ports are the Puget Sound ports; Pensacola, 
Florida; Rio de Janeiro, Brazil; Victoria and Lis- 
bon, Portugal. In ahnost all cases the depth of the 
bay has to be increased by dredging. 

Most seaports, however, are located at the point 
where river and ocean navigation meet. Formerly 
this point was found much farther inland than it 
is today, when the draft of ocean vessels is thirty 
feet or more. For example, Cologne on the Rhine, 
210 miles up the river from the Hook of Holland, in 
mediaeval times was a gi-eat seaport, altho the depth of 
the channel could hardly have amounted to more than 
three feet. Ports like Hamburg, 85 miles up the 
Elbe, Bremen, 75 miles up the Weser, and Antwerp, 
59 miles up the Scheldt, hold their position only be- 
cause of enormous expenditure to adapt the channels 
of these rivers to modern requirements. And even 


in spite of all efforts the largest ships can no longer 
enter these ports, but must stop at outside stations 
at the mouth of the river, such as Cuxhaven and Wil- 
heknshaven. Likewise, large steamers for London 
get only as far up as Tilbury Docks. 

London, Rotterdam, Montreal, Philadelphia, New 
Orleans, and Portland, Oregon, are other significant 
examples of river ports. The river, first by the trans- 
portation service which it renders itself, and later on 
by the competition which it causes to railroad trans- 
jDortation, has laid the foundation of the prosperity of 
these ports. 

The most favorable location for a port is the head 
of a bay into which a large river discharges. New 
York is the most conspicuous example of such a 
port. Its maritime commerce excels that of any other 
port in the world. For this reason, as well as be- 
cause of the fact that New York forms the main gate- 
way of the foreign commerce of this country, we 
shall here give a more detailed account of the present 
status and future possibilities of this port. 

4. New York's predovimance. — The Department 
of Commerce of the United States credits New York 
with an aggi-egate foreign trade of $2,125,000,000 in 
the fiscal year 1915, or $200,000,000 more than the 
trade of London. For the sake of comparison, the 
figures showing the value of imports and exports of 
the twenty leading ports of the world, according to 
the latest available statistics, are given on page 298. 


Imports Exports 

New York $931,000,000 $1,193,600,000 

London 1,232,100,000 696,000,000 

Hamburg 1,084,300,000 817,300,000 

Antwerp 623,200,000 588,200,000 

Liverpool 810,000,000 836,000,000 

Marseilles 389,600,000 365,700,000 

Havre 357,900,000 258,800,000 

Bremen 370,600,000 211,400,000 

Calcutta 229,300,000 317,600,000 

Bombay 202,800,000 225,400,000 

Buenos Aires 200,800,000 140,400,000 

Trieste 176,000,000 161,400,000 

Singapore 186,400,000 145,400,000 

Hull 199,700,000 130,500,000 

Sydney 151,900,000 151,400,000 

Genoa 199,800,000 103,100,000 

New Orleans 79,700,000 209,400,000 

Montreal 141,200,000 119,300,000 

Boston 152,700,000 107,500,000 

Shanghai 159,200,000 98,600,000 

Manchester 164,200,000 93,200,000 

Galveston 10,100,000 230,400,000 

Glasgow 82,100,000 155,000,000 

Kobe 140,400,000 83,400,000 

Dunkirk 187,500,000 36,200,000 

Yokohama 89,000,000 134,200,000 

Alexandria, Egypt . . . 91,100,000 116,100,000 

Melbourne 118,400,000 86,400,000 

Southampton 91,100,000 94,700,000 

Petrograd 110,900,000 69,100,000 

New York's share of the exports and imports of this 
country amounted to : 


Year Exports Imports 

1862 72 per cent 68 per cent 

1872 53 per cent 66 per cent 

1882 43 per cent 68 per cent 

1892 40 per cent 64 per cent 

1902 36 per cent 61 per cent 

1912 37 per cent 52 per cent 

1913 37 per cent 57 per cent 

1914 37 per cent 55 per cent 

1915 43 per cent 56 per cent 

1916 53 per cent 54 per cent 

Official statistics show that New York has collected, 
for the last 20 years, an average of 65 per cent of the 
nation's customs. 

5. New York's '' hinterland/' — The hinterland of 
New York, because of the unparalleled concentration 
of trunk lines at this port and the competition existing 
among them, extends far beyond the normal sphere 
of influence of a port. This railroad situation tends 
to perpetuate in New York the preponderance in ex- 
ports from the West, the foundation of which was laid 
l)y the Erie Canal. The preeminence of New York 
among the ports of the Atlantic seacoast is so marked 
that New York is in a class by itself, all other ports 
being called "outports." These "outports" must con- 
tent themselves with only one or two or three trunk 
lines. Thus, Norfolk is reached by the Norfolk and 
Western; Newport News by the Chesapeake and 
Ohio. Both these railroad companies enter New York 
via the route of the Old Dominion Steamboat Com- 


pany, in which they are part owners. Baltimore is the 
home port of the Baltimore and Ohio, which shares 
the trade of this port with the Pennsylvania and the 
Western Maryland (now part of the New York Cen- 
tral System). Philadelpliia has the Pennsylvania 
Railroad, but is also served by the Baltimore and Ohio 
and by the Reading. None of these roads can dispense 
with a direct or indirect connection with New York, 
which has, in addition, two exclusive trunk lines of its 
own, the New York Central and the Erie. 

6. Railroad-steamsldp lines. — Railroad facilities 
attract line service, either by their mere presence, as 
in the case of New York, or by special inducement, 
as in most "outports." These inducements may take 
the form of railroad participation in the construction 
of steamship lines, the guarantee of a minimum cargo 
for proposed sailings, or an exclusive contract with the 
steamship line to give it all the cargo collectible. The 
railroads often refuse to grant thru bills of lading for 
shipments going thru other ports than that in which 
they are particularly interested. It is a common prac- 
tice for a railroad to grant the use of a pier free of 
charge to that steamship line with which it cooper- 
ates. In the case of New York, the steamship lines 
are so anxious to share in the rich traffic of that port 
that no inducement seems necessary. 

7. Charter traffic in Atlantic seajwi'ts. — As far as 
tramp traffic is concerned, New York does not hold 
tlie same leading position, as appears from the follow- 
ing table. It is true that these figures refer only to 



grain cargoes. Since, however, grain is the most im- 
portant outward cargo for tramps, the figures given 
below may be considered as representative of the situ- 

Number of Full Grain Cargoes Loaded at Philadelphia, 
Baltimore, Boston, and New York.^ 
Year Philadelphia Baltimore Boston 

1878 13 



1893 .... 




1909 .... 





1914 .... 
19152 . . . 





























New York 




The strong position of Philadelphia and Baltimore 
in the grain trade, as far as it is carried on by tramps, 
is due, among other reasons, to the differential rail 
rate which favors these ports over New York and 
Boston, the reasons for which are explained in the 
Modern Business Text on "Railway Traffic." The 
recent revival of grain traffic at New York, beginning 
in 1910, is due to the establishment of an elevator serv- 
ice at reduced charges, this reduction largely offset- 

1 This table was furnished by Frank L. Neall, manager Consolidated 
NeiDs, Statistics and Transportation Bureau, Philadelphia. 

2 To March 31st. 


ting the effect of the differential. Boston gets only 
a rare overflow cargo, owing mainly to the effect of 
the railroad differential against the port, on exports 
from the West. 

8. ^'Entrepot" or transshipment trade. — While to- 
day railroad and steamship connections are the deter- 
mining factors in the upbuilding of a great port, an- 
other feature of port development is of greatest im- 
portance: "entrepot" or transshipment trade. In 
olden days this trade was often based upon a privi- 
lege granted to certain cities by the ruling power, and 
in many cases was the key to successful port develop- 
ment. London and Hamburg owe much of their 
present greatness to their transshipment trade. Nor- 
mally, Hamburg is supreme in the transshipment 
trade with Russia and Scandinavia. Whether it will 
regain its position lost as a result of the war, is a ques- 
tion which cannot now be answered. The extent of 
London's transshipment trade can hardly be measured 
as a separate unit by itself. In a consideration of 
England's trade, London, Liverpool and other mar- 
kets must be taken together as coordinated markets 
with London as the controlling center, for commodi- 
ties traded at London are often warehoused in other 
English ports. Among the hundreds of things that 
England re-exported we find over 6,000,000 pounds 
of pepper, almost 14,000,000 pounds of raw cocoa, 
53,000,000 pounds of tea, more than 3,000,000 pounds 
of tobacco, 338,000,000 pounds of ordinary wool. 


324,000,000 pounds of raw cotton, 923,000,000 pounds 
of palm oil, 978,000,000 pounds of tallow, and 
726,000,000 pounds of rubber. 

Compared with this, the re-export trade of tlie 
United States is exceedingly small. Measured by its 
value in 1913 it amounted to but l!4 per cent of all 
exports, and % per cent of all the country's com- 
merce. It has been decreasing in proportion to the 
whole trade. 

.The main advantage derived from "entrepot" trade 
may be seen in the establishment of large markets. 
These markets attract considerable amounts of mer- 
chandise which would otherwise be shipped to other 
parts of the world. London's privileged position as 
the world's consignment market is the best illustration 
of this condition. A consignment shipment is ex- 
ported before a foreign buyer has been found. If a 
merchant or producer cannot wait until he has sold 
his goods to ship them, and is unable to sell his goods 
afloat, he consigns them, in most cases, to a merchant 
in London, where most commodities can be readily 
sold. For certain goods, such as coffee, Hamburg 
has become a consignment market. 

9. Lack of transshipment trade at New York, 
— New York as a trading center, i.e., a market for 
commodities, takes a place behind London and Ham- 
burg, and in a way is hardly of greater importance 
than several minor European cities. New York is not 
a focus where large quantities of raw materials and 

XV — 21 


manufactures converge from all parts of the world to 
be sold and distributed again to other far corners of 
the globe. It has not yet become a market port. 

Many reasons explain the different position of 
London and Hamburg on the one side, and New York 
on the other. American commercial banking, until 
the passing of the Federal Reserve Law, was unable 
to finance foreign trade to any extent, consequently 
London's supremacy as the financial center of the 
world went almost unchallenged. Furthermore, in 
contrast to New York, London and Hamburg possess 
warehouse systems which are developed to a high de- 
gree of efficiency. An asset that New York does not 
yet possess, is the close cooperative organization of 
great foreign trading houses, with branches and cor- 
respondents in all parts of the world, which, in the 
case of Hamburg, may be said to amount almost to 
free masonry in the execution of trade. 

10. British raw materials. — Thru large markets, 
which often take the form of auction markets, London 
exercises a powerful control over the world's supply 
of important raw materials, especially of wool and 
raw rubber. Modern manufacturing often requires 
the mixing of different grades of raw materials that 
are produced in different parts of the world. This 
mixing renders the assembling of raw materials in 
great central markets most desirable. 

To be sure, London owes much of its position as the 
world's leading trading center to its position as the 


capital of the British Empire. How large a portion 
of the world's important raw materials is grown in 
the British Empire appears from the following table. 
Here the imports of the United States for the fiscal 
year 1914 are divided according to their source of 
origin. This table summarizes the possessions of all 
the Entente Allies in the European war and does not 
show the British colonies separately. These, how- 
ever, form a large proportion of the territory con- 
trolled by the Allies. 


From From 

Non-Ally the Entire 

Territory World 

Abrasive materials $319,220 $855,412 

Aluminum 1,130,390 2,707,006 

Antimony 200,083 696,362 

Asbestos 1,790 1,678,736 

Asphalt and bitumen 445,623 722,339 

Bismuth 253 241,449 

Dried blood 145,165 391,816 

Bones, hoofs and horns 720,220 1,061,466 

Bristles 1,761,851 3,196,469 

Chalk 15,368 156,525 

Chemicals 44,604,486 62,531,241 

Vanilla beans 1,236,718 2,277,675 

Wax mineral 472,999 543,103 

Wax vegetable 925,279 1,049,126 

Gums 2,529,301 12,735,627 

Chicory 24,502 47,882 

Clay and earth 232,493 2,246,807 

Cobalt ore 53,062 115,038 

Cocoa 3,739,573 20,797,790 

Logwoods 186,166 487,992 

Feathers, undressed 305,040 4,871,663 

Fertilizers (except potash) 3,104,600 7,990,023 

Coffee 110,649,987 110,725,392 

Cork 3,942,156 6,499,632 

Cotton (raw) 6,303,556 19,456,588 

Potash and manure salts 15,048,836 15,160,123 



From From 

Non-Ally the Entire 

Territory World 
Fibers : 

Flax 64,3T8 21,870,274 

Hemp 159,536 1,564,483 

Jute 63,363 11,174,028 

Miscellaneous fibers 37,140,308 39,974,032 

Fluorospar 1,818 50,851 

Oleaginous nuts 4,013,064 7,769,054 

Furs and skins 5,306,039 13,835,646 

Gelatin 606,542 738,731 

Glue 985,457 1,805,543 

Grease 738,416 1,800,650 

Hair 1,379,442 3,369,978 

Hides and skins 57,559,395 119,374,587 

Rubber, gutta percha, etc 24,566,609 76,162,220 

Iridium 43,824 207,832 

Iron chromate 195,223 737,127 

Iron ore 5,386,041 11,901,007 

Ivory 113,885 1,340,644 

Ivory, vegetable 844,843 881,354 

Manganese oxide 576,051 1,841,451 

Ferro alloys 3,741,281 6,630,538 

Mica 78,561 836,815 

Monozite sand, etc 52,339 52,329 

Moss, etc 120,856 301,259 

Nickel ore 836 6,203,301 

Oakum $241,488 $1,033,251 

Palladium, etc 20,006 169,171 

Platinum 1,378,513 1,846,126 

Graphite 224,055 1,846,126 

Radium 37,851 59,816 

Vegetable oils: 

Cocoa butter and oil 2,661,683 7,497,393 

Olive oil 1,096,876 8,394,190 

Palm oil, soya, etc 3,871,669 10,549,034 

Silk 15Jp61,541 97,828,243 

Spices 7,802,104 11,962,557 

Sponges 211,735 481,973 

Sulphur 2,970,036 3,695,335 

Tanning material 1,180,45R 1,566,001 

Tin 1,937,676 39,437,430 

Tobacco 34,397,488 35,034,929 

Tungsten 78,709 129,291 

Wax 401,030 476,364 

Whalebone 11,452 

Woods, etc.: 

Briarwood 1,865 241,493 

Cabinet woods 3,281,817 9,341,339 

Rattans 175,388 510,842 

Wood pulp 11,046,802 17,023,333 


From From 

Non-ally the Entire 

Territory World 


Wool, clothing 8,846,430 28,9i?2,605 

Wool, combing 577,948 3,857,123 

Wool, carpet 7,898,170 17,029,611 

Wool, angora, etc 266,513 572,430 

$447,881,504 $909,027,580 

11. Free ports, — One practical step toward estab- 
lishing a large transshipment trade at the port of 
New York has been made in the proposition for mak- 
ing it a "free port." Such an institution is merely a 
section of a port, in some cases an entire port, which 
is excluded from the customs territory. This exclu- 
sion facilitates re-exportation, since it saves the trou- 
ble involved in bringing goods thru the customs. 

Another type of free port is that of Hongkong. 
This harbor — whose vessel tonnage entering increased 
265 per cent from 1888 to 1912, while that of New 
York during the same period increased but 140 per 
cent — is an absolutely free port. There are great 
"go-downs" — as warehouses are termed in that part 
of the world — manufacturing establishments, com- 
mercial houses, banks, and all the paraphernalia of 
trade; and the commerce and industries connected 
with the business thus built up now support a popula- 
tion of approximately 400,000. Copenhagen was 
made a free port in 1891. Just now, Spain is trying 
to improve her position as a neutral trading nation by 
establishing a free port in one of her great ports. 
Many other free ports exist. 

Just now a resolution is before Congress providing 


for a commission to consider the question of creating 
free ports in the United States/ The resolution is 
strongly supported by the Merchants' Association in 
New York which is said to have originated the free- 
port idea in this country. Several years ago the 
Merchants' Association sent Mr. Philip B. Kennedy, 
an expert in trade and transportation, to Europe to 
make a sui'vey and complete study of the leading Eu- 
ropean free ports. His report, covering fifty-five 
pages, was pubhshed in February, 1914, by the Asso- 
ciation, and amounts to a strong recommendation for 
the establishment of a free port in New York. 

An essential feature of the equipment of a modern 
seaport is the freight-handling machineiy. The ten- 
dency of the age is to economize in labor by investing 
capital in machinery. In Hamburg, whose port pos- 
sesses an excellent equipment of electric and hydraulic 
cranes and hoists, a remarkable speed in the handling 
of trade is attained. Thus the average rate of dis- 
charge at the "Kuhwarder piers" is 250 tons of gen- 
eral cargo per hour. In the handling of bulk com- 
modities the ports of United States are probably su- 
perior to all others. 

1 In the summer of 1916, following the lead of the United States agita- 
tion on the subject, a proposal was made that a stretch of shore opposite 
Montreal, extending from St. Lambert to Longueuil, should be set aside 
by the Canadian government as a free port and that goods should be 
permitted to pass in or out, duty free. The proposal, however, was given 
little serious consideration, partly because of its newness and partly be- 
cause it was difficult to see just what advantages would accrue to the 
country as a whole. In most cases Canadian manufacturers are now 
getting their raw materials free as it is, and Canada as yet can make 
little pretense of being a great intermediary trading nation. 


12. Rail and water coordination of carriers. — An 
important problem of harbor traffic is the coordination 
of rail and water carriers. That means providing the 
most economical method of exchanging freight be- 
tween rail and water carriers. The lack of such a 
method results in serious waste in drayage, lighterage 
and switching. Wherever it is possible, piers and 
quays ought to possess direct rail connection. Vari- 
ous railroads serving a port should be linked together 
by such a belt line as that which exists, for instance, 
in New Orleans. New York has a natural belt line in 
its harbor waters. In New York an extensive car- 
float service and a lighterage system, with free deliv- 
ery within extensive limits, greatly facilitate the mov- 
ing of cargo from any part of the harbor to another, 
from one railroad to another. The existence of such 
service accounts for the decentralization of industries 
thruout Greater New York. Factories are scattered 
over almost the entire waterfront, including Manhat- 
tan, Staten Island, Brooklyn and the Bronx. 

13. American International Terminal Corporation. 
— One of the most promising events in the world of 
dock development is the organization of the American 
International Terminal Corporation, a subsidiary of 
the American International Corporation. This new 
company has been formed to make a study of railway, 
steamship, warehouse and industrial terminals. The 
American International Corporation, because of its 
interest in the development of South American trade 
and also because of its extensive holdings of shipping 


stocks — it owns large amounts of shares of the Inter- 
national Mercantile Company and the United Fruit 
Company, and in connection with its associate, W. R. 
Grace and Company, controls the Pacific Mail Steam- 
ship Company — is vitally concerned in the bringing 
about of better rail and water coordination in Ameri- 
can ports. It is asserted that transportation on land 
and sea has reached higher development in traveling 
and carrying equipment than in terminal facilities. 

The significance of the terminal problem was well 
stated by an officer of the new company, in the follow- 
ing words: 

It is well known that the capacity of a railroad is limited 
to what its terminals can handle. Its miles of track cannot 
be used to their utmost if the terminals cannot take care of 
the freight. Likewise the greatest preventable waste of the 
time of cargo ships occurs at docks and anchorage, incident 
to loading and unloading. Transfer facilities in general — 
involvmg the discharge of goods from trains, their distri- 
bution to consumers, their storage in warehouses, their ex- 
change from one railroad to another, their loading into ships 
— all of these functions are more difficult, more costly, and 
less understood than the straight carriage of goods by rail 
and boat. 

14. Canada's leading summer port: Montreal. — No 
single port in Canada holds a place comparable to that 
of New York. Montreal most nearly approximates 
it. Among Canada's ports it is easily first, both in 
exports and in imports, in spite of the fact that it is 
closed for nearly five months in the year. The ex- 
ports from Montreal during the calendar year 1916 


amounted to $382,741,463, and its imports to 
$194,924,348, or 34 per cent and 26 per cent, respec- 
tively, of the totals for the whole of Canada. These 
figures are higher than usual, but in the last three 
years Montreal has received 24 per cent of Canada's 
imports, and despatched 22 per cent of her exports. 
Ordinarily about one-fourth of Canada's customs dues 
are collected at this port. In respect of tonnage 
again, it is excelled by two only, and in some years by 
one only, of Canada's ports. For 1915 the total ton- 
nage of the 484 trans-Atlantic steamers, the 331 ships 
from the Maritime provinces, and the 8,572 "inland" 
vessels from the Upper Lakes, which arrived in the 
harbor amounted to 6,483,700. The sea-going ton- 
nage of 4,031,299 in 1915 compared with a total of 
13,132,944 for the whole of Canada. In the previous 
season, the number of vessels arriving at the port of 
Montreal was 13,141, with a tonnage of 9,044,457. 

15. Montreal's hinterland. — The inland seaport 
owes its dominance to its position at the point of con- 
vergence of important commercial highwaj^s. The 
St. Lawrence Ship Channel, on which some 
$70,000,000 has been spent by the government, leads 
to the Atlantic. The Ottawa River also leads up to 
the Dominion capital and to the greatest lumbering 
region of the country. Direct access by rail and canal 
is also secured to the Hudson Valley and New York 
thru the valley of the Richelieu River. 

But more important is the magnitude of the port's 
hinterland. It is the natural outlet for Ontario. It 


is also the natural Canadian outlet for nearly the 
whole interior of the country. The Great Lake 
routes, the greatest of fresh water transportation sys- 
tem in the world, converge upon it. 

16. Canadian Pacific and Grand Trunk Railways. 
— Montreal is the headquarters of the Canadian Paci- 
fic, the Grand Trunk and the Grand Trunk Pacific 
Railways which gather grain, cattle, fruit, dairy prod- 
uce, minerals and other products from the interior of 
Canada. These railways, in addition to their Cana- 
dian mileage, own a large mileage in the United 
States, stretching out to Chicago and other important 
centers of the Central and Western states. For the 
Canadian Northern Railway, Montreal, tho not the 
headquarters, is the most important seaport. Fi- 
nally, it is the western terminus of the Intercolonial 
Railway. All these routes facilitate the collection of 
coal and raw materials, leading to large manufactur- 
ing industries on the harbor waterfront which also re- 
ceive assistance from the cheap water power of the 
nearby Lachine Rapids. 

17. Coordination of rail and water services at Mon- 
treal. — The importance of coordination of rail and 
water carriers has already been pointed out. In this 
respect Montreal is well served. One of the unique 
features of the port is the complete ownership by the 
Dominion government of the entire waterfront, in- 
cluding both sides of the river for a length of eighteen 
miles. Control is exercised by a harbor board of three 
commissioners. Thej^ control also a well-equipped 


freight transportation railway. The charges for 
moving cars are set forth in a tariff adopted by the 
harbor board. The system is connected with every 
railway that enters or terminates at Montreal, and in- 
cludes over fifty miles of tracks. 

18. Traffic to and from Montreal. — Situated at the 
point where grain from the West is transshipped from 
the railroads, and from lake and river boats to ocean 
steamers, Montreal has the largest gi^ain elevators of 
any ocean port. The total capacity of the elevators 
is now nearly 9,000,000 bushels of grain. In the sea- 
son of 1914 they handled over 75,000,000 or over 
10,000,000 more than New York, the nearest competi- 
tor among the Atlantic ports. 

19. Canadian Pacific imrts. — On the Pacific coast, 
Canada's principal ocean ports, are Vancouver, Vic- 
toria and Prince Rupert, all three with splendid nat- 
ural harbors and all three nearer to the Orient than 
Pacific ports of the United States. The building of 
the Panama Canal led to considerable improvements 
b}^ the government and the railways in ocean terminal 
facilities in all three cases. 

In respect to tonnage, Vancouver and Victoria lead 
the Dominion ports. In 1916, the tonnage of sea-go- 
ing vessels entering and clearing from Victoria was 
4,169,908. Vancouver tho with a larger total ton- 
nage, ranked only second from the point of view of 
sea-going tonnage with 3,481,761 tons. 

20. St. John and Halifaoc. — On the Atlantic coast 
are the ports of St. John and Hahfax, which, along 


with Portland, Me., share the trade lost to Montreal 
during the winter months. St. John is the winter 
port for the Canadian Pacific liners from Liverpool. 
Halifax has one of the finest and safest harbors in the 
world. It is easily accessible from the ocean by the 
largest vessels afloat, in any weather and at any state 
of the tide. Halifax is 616 geographical miles nearer 
to Liverpool than is New York. It has also a similar 
advantage of 200 miles over St. John, and chiefly be- 
cause of this it makes a claim for supremacy as Can- 
ada's leading winter port. Its rival makes the coun- 
ter-claim that it is nearer the center of Canada where 
the freight originates. Just at present, measured by 
sea-going tonnage and by exports and imports, St. 
John is in the lead. 

Quebec, which was formerly an important ship- 
building and timber port, has lost much of its impor- 
tance since the deepening of the St. Lawrence to Mon- 
treal. It has, however, a fine harbor, and the terminal 
and elevator facilities are ample for a considerably 
larger business than the port at present enjoys. 


What is the importance of a port, and what is its relation to its 
hinterland ? 

Describe four classes of ports differing in their physical char- 

What is the relative importance of New York among the great 
ports of the world, and among the ports of the United States? 
How have railroads contributed to its development? 

How do the shipping facilities of New York compare with 
those of other American ports in liner service? In tramp serv- 


What is the significance of transshipment business, and why is 
it more highly developed abroad than in New York? 

Describe free ports and the function which they perform. Dis- 
cuss the proposal for a free port at New York. 

What is the physical relationship between ocean shipping and 
the railways .'' How closely are they associated in actual manage- 
ment ? 

Give reasons for the present position of Montreal among 
Canadian seajx)rts. 



1. Present role of American shipping. — Of the 
overseas commerce of the United States only a small 
proportion — 10.1 per cent in 1913, 9.7 per cent in 1914 
and 11.4 per cent in 1916 — is carried in American bot- 
toms. Tho the merchant fleet of the United States 
ranks second to that of Great Britain, it is for the most 
part operated in coastwise traffic and on the Great 
Lakes. In the general carrying trade of the world 
American shipping plays only a minor role. British 
and Norwegian ships transport the commerce of their 
own countries and a large share of that of other na- 
tions. The United States does not even carry its own 

2. Coastwise tonnage. — It should be borne in mind 
that no problem has arisen in connection with that part 
of our merchant marine which is engaged in the home 
trade of the country on ocean, lake and river. This 
part of our navigation has been reserved to American 
vessels since the founding of the Federal government. 
The early policy of reserving our coastwise tonnage to 
American registry and ownership, followed without 
material modification ever since, has resulted in a 
steady rise of our coastwise and lake tonnage from 



66,607 in 1789 to 6,852,536 in 1914. The coastwise 
shipping represented by these figures considerably 
excels that of any other nation. Indeed these figures 
are even greater than those of the entire coastwise 
and overseas tonnage of the German Empire, and they 
represent three times the entire tonnage of France 
or Norway. In short, American coastwise navigation 
is a well-developed and prosperous business, with free 
play of competition among its participants. 

3. Merchant marine a national question. — The sub- 
ordinate role of American shipping in the world's car- 
rying trade has been held up to us as a national re- 
proach. But the question of our shipping interests 
is more than a matter of sentimental regret. It is 
one of national concern, vital to a healthy develop- 
ment of our foreign trade. It is futile to shed tears 
over past glories now departed. What is needed 
most is a dispassionate, thoro study of present condi- 
tions. The true significance of the present situation 
cannot be fully grasped, however, without a brief ref- 
erence to certain past conditions of which it is the out- 

4. Beginnings of our merchant marine. — The his- 
tory of the American merchant marine has been often 
told, and we need only refresh our memories on some 
of its chief incidents which have a bearing on present 

When the nation was born the merchant marine was 
in a sorry plight. Promising developments of the co- 
lonial period had been checked by the Revolutionary 


struggle, and in 1789 the entire fleet registered for 
foreign commerce amounted to only 123,893 tons. 
The tariff legislation of the period favored our ships 
by a reduction of duties by ten per cent for all goods 
imported in American vessels. The Napoleonic 
struggle in Europe then impending, and soon to break 
out and engage the energies of Europe for the next 
decade and a half, stimulated our shipping. Tonnage 
grew to 667,107 in 1800. Our own trade had been 
handled almost entirely in our own vessels, and we 
absorbed a large carrying trade from the West Indies 
to Europe, and a considerable transshipment trade 

5. Development of shipping checked. — Things 
went well until combatants in Europe thru their 
blockade began to interfere with our shipping. Vainly 
we protested. Our protests unheeded, we were led 
into the War of 1812 of glorious memories and vague 
and uncertain results. When peace settled upon the 
world we were confident of the strength of our posi- 
tion. The preferential treatment of our shipping was 
abandoned, and commercial treaties removed all spe- 
cial advantages we had enjoyed. 

Our merchant marine developed more slowly. By 
1850 it had reached 1,585,711 tons. In 1830 our ships 
carried 90 per cent of our commerce. In 1850 on the 
other hand, the percentage of American commerce 
carried in our ships had decreased to 72.5, tho the 
amount and value had somewhat increased. In the 
meantime, however, the fleets of foreign countries, es- 


pecially Great Britain, had increased more rapidly. 
Conditions of competition were changing. Steam 
was beginning to be appHed as motive power. Great 
Britain encouraged the building of steamships by a 
system of subsidies. The Cunard Line owes its be- 
ginning to this policy. To some extent the United 
States met this competition, and in the forties several 
steamship lines were subsidized. In 1847 the gov- 
ernment made its contract with the Collins Line which 
became a worthy rival of the Cunard. 

6. Shipping begins to decline. — For a few years 
there was a splendid development of American ship- 
ping which reached its climax in 1855, when no less 
than 583,450 tons of shipping were launched from 
American yards. In the next few years and even 
before the Civil War there was a marked falling 
off. This followed the withdrawal of the subsidies 
and encouragement which the government had given 
to shipping. The Civil War merely accelerated the 
decline of American shipping, which had begun six 
years earlier. Confederate cruisers between 1861 
and 1865 burned or appropriated 110,000 tons of 
American shipping, and drove 751,595 under foreign 
(mainly British) colors. Thus the seagoing fleet, 
which in 1861 amounted to 2,496,894 tons and carried 
65.2 per cent of our exports and imports, had shrunk 
in 1866 to 1,387,756 tons, which carried only 32.3 per 
cent of the foreign trade. 

7. Recent tendencies. — From these blows Ameri- 
can shipping has never recovered. The loss was 

XV— 22 


steady until 1898, when a minimum tonnage of 726,- 
213 was reached. A sHght recoveiy has taken place. 
The lowest point was reached in 1900 when only 8.2 
per cent of our foreign trade was carried in American 

The decline in American shipping was coincident 
with the rise of iron and steel ships. The supremacy 
of American shipping was largely based upon the 
abundance of raw material and skill in ship construc- 
tion. With the appearance of iron materials this su- 
premacy passed to Great Britain. For many years 
British shipyards enjoyed not only this advantage, but 
those of a lower wage scale, and of large scale pro- 

During the past thirty years the question of stimu- 
lating the merchant marine has been constantly before 
the public, but little has been accomplished. The only 
positive legislation is the Postal Aid Act of 1891, un- 
der which arrangements are made with American 
lines for the carriage of mails, at rates somewhat 
higher than contract rates. 

8. American merchant marine comjjared to others. 
— It is a rather difficult undertaking to measure the 
comparative size of the merchant marine of various 
countries, as the statistics are not made up on the same 
basis; in particular, the distinction between coastwise 
and foreign trade tonnage is not clearly drawn in all 

The following table, prepared from "Lloyds 
Register," 1914-15, and the report of the United 



States Commissioner, 1914, shows the number of the 
net and gross tonnage of steam and saihng vessels 
of over one hundred tons of the ten leading foreign 
nations and of all vessels of the United States in the 
foreign trade except barges. 






Uet Tonnage 










































' 1,471,710 











Austro Hungarlaa 





















ITDlted States 







9. United States steam foreign trade. — It must be 
noted that the figures for the ten foreign nations in- 
clude both foreign and coastwise tonnage, whereas 
those for the United States include only vessels reg- 
istered for foreign trade. This is not an unfair com- 
parison, as in foreign nations the tonnage employed 
in coastwise shipping is a relatively small proportion 
of the entire merchant marine. 

The following is a table which gives an analysis of 
the United States steam vessels in foreign trade. It 
clearly shows the sad state in which the American 
merchant marine is at the present time : 






Over 20,000 tons 



10,000 to 20,000 



7,000 to 10,000 



5,000 to 7,000 



3,000 to 5,000 



1,000 to 3,000 



500 to 1,000 



100 to 500 



jCss than 100 tons 






In recent years conditions have changed greatly, 
and many of the adverse factors which have prevented 
the growth of an American merchant marine have 
either been ehminated or have been converted into 
favorable influences. 

10. Awakening interest. — Thus the interest in the 
internal development of the country is no longer all- 
absorbing, and no longer entirely precludes the in- 
terest in the overseas trade. The large amounts of 
capital which have been invested in American shipping 
by such firms as the Standard Oil Company, United 
Fruit Company and the United States Steel Products 
Company show the new trend of thought. 

The development of our steel industry has brought 
the price of ship plates somewhat below the figure 
quoted by British manufacturers. This should bene- 
fit especially the manufacturers of standard tramp 
steamers. Furthermore, new railroad lines have been 
constructed which act as feeders of our shipping in- 
dustry. This is especially true of coal-carrying rail- 


roads. Virginia steam coal of excellent quality can 
now be delivered at low cost at Atlantic seaports, such 
as Norfolk, Newport News, and Charleston. This 
coal might be able to compete with the Australian, 
Japanese and Welsh coal which now controls the Far 
Eastern market, and might tend to reduce the return 
freight rates on imported nitrates, as well as on cop- 
per, tin and iron ores. 

Thus the time seems right for a wholesome develop- 
ment of the American merchant marine, but so far 
the genius of American business has stayed at the 

11. Adverse economic conditions. — While the stage 
is set for the new era of the American merchant ma- 
rine, there are economic conditions which even 
today hamper a free development of American ship- 
ping. Here we must recall the American wage scale 
for officers and engineers and the higher requirements, 
due to more stringent navigation laws, applied to 
American shipping as compared with that of other 
countries, in regard to food, crew quarters and life- 
saving equipment. It is idle to scold American busi- 
ness of today for a lack of enterprise on the ground 
that it refuses to enter on a large scale into merchant 
shipping. This is not the case, for American capi- 
tal is invested in foreign shipping to such an extent 
that prior to the European war the total foreign ship- 
ping owned by American interests aggregated be- 
tween one and one-half and two million tons. 

12. Congressional attempts to aid. — The first evi- 


dence of a desire of Congress to encourage American 
shipping on the high seas was the insertion, in the 
Panama Canal Act of 1912, of a clause authorizing 
the naturalization or admission to American registry 
and flag of foreign built vessels under five years of 
age, and granting the free entry of materials used in 
the construction and equipment of ships. This clause 
reversed the national policy of a hundred years. In 
the face of this invitation, two years went by without 
a single foreign built ship seeking the American flag. 
No better evidence could be desired of the higher cost 
of operation imposed by American policy than in this 

The willingness of Congress to encourage shipping 
was further proved by the inclusion in the present 
tariff act of a clause allowing a discount of five per 
cent in the customs duties on goods imported in Amer- 
ican bottoms. We are reminded of the early policy 
of 1789 which had produced such marvelous results, 
but administrative interpretation has thus far made 
it non-operative and its legality (in the face of our 
treaties) is before the Supreme Court upon appeal. 

13. New conditions caused by the European war. — 
The European War created new conditions and op- 
portunities which Congress had to take into account. 
Thus, on August 18, 1914, an act was passed which 
eliminated the five-year age limit and also the require- 
ment of "fitness to carry dry and perishable cargo" ; in 
other words, removed all the modifications of the Pan- 
ama Canal clause admitting foreign built vessels to 


American registry. Thus the doors were opened 
wider still. Ships entering American registry were 
allowed to retain their foreign officers, which reversed 
the policy that the American flag could fly over no 
ships not officered by Americans. As a result some 
hundred and seventy-five to two hundred steam and 
sail vessels have come under the American flag. A 
large percentage of the boats was already employed 
in American trade, most of them the property of 
American citizens before their admission to American 
registry. The motive of shipowners in transferring 
their ships to American registry at the outset of the 
European war was to secure the protection of the flag 
of the most powerful neutral. The flag and the more 
favorable marine insurance rates constituted a gener- 
ous subsidy to these unfortunate ships for the time 

If, with peace, the old conditions are allowed to 
revive, the ships will probably be transferred back 
again to their old flags. 

The government also established a War Risk 
Bureau to insure American vessels during the war. 
This action afforded American vessels the same pro- 
tection in the war zone as was given to vessels of 
other nations thru the establishment of similar in- 

Little real encouragement can be found in the re- 
sults of the Emergency Act of 1914, for in spite of the 
great inducements resulting from war conditions, 
there came a significant halt in seeking American reg- 


istry. Fewer and fewer vessels applied for the 
American flag. 

14. Ship Purchase Bill. — Following the ship regis- 
try act, the preferential clause of the tariff and 
the War Risk Bureau, ambitious projects appeared 
to develop American shipping in foreign trade. At 
that juncture a severe blow was struck by the admin- 
istration's announcement of its intention to operate 
ships in foreign trade under government control. 
Without leaving commercial and financial enterprise 
time to recover from the initial shock of the war, the 
government took this unfortunate form of express- 
ing its discontent with failure of private shipping con- 
cerns to avail themselves of the momentous oppor- 
tunity to build up an American merchant marine. 

Of the reasons behind the Ship Purchase Bill of 
late 1914, E. J. Clapp in his "Economic Aspects of 
the War" says: 

One of these was the desire to relieve the distress of the 
cotton states and to start a movement of grain which for a 
time was halted by lack of ships. Another reason was the 
desire of the Democratic Administration to call into life an 
American merchant marine. 

The bill was projected in August and September of 1914. 
It provides for a corporation in which the American govern- 
ment was to be the main stockholder. The corporation was 
to have fourteen million dollars at its disposal, available for 
purchasing ships. 

The only ships that could have been bought were 
the interned German ships in our ports. They were 
needed to cany cotton to Germany, not yet cut off 


by the blockade. But the British objection to the 
purchase of German ships caused the administration 
so to veil its intentions as to ships and services that it 
finally appeared as if the administration were asking 
for ships from un-namable sources to institute un- 
necessary and superfluous sei-vices. The bill was 
defeated in February, 1915. 

15. Seamen's Law, — Another unfavorable govern- 
ment policy was introduced by the enactment of the 
Seamen's Law. This bill had once before passed both 
the House and the Senate, but had been vetoed by 
President Taft just before the close of his administra- 
tion. In the Presidential campaign of 1912 both 
parties committed themselves to the passage of the 
Seaman's Bill. The Seamen's Bill accordingly was 
introduced into the Sixty- third Congi'ess and after 
almost two years of consideration was unanimously 
adopted by both Houses of Congress. It became 
effective for American vessels November 4, 1915, and 
has applied to foreign vessels since March 4, 1916. 
The Attorney General has decided that the severe re- 
quirements as to life-saving equipment and the man- 
ning of such equipment do not apply to foreign vessels 
owned in countries with which the United States still 
has reciprocity treaties. American shijDS thereby are 
placed under a further handicap. Furthermore, in 
order to insure greater safety for passengers, the law 
provides that American ships must have a greater 
number of deck hands, rated as "able seamen," than 
is required by the law of any other country. 


The Seamen's Law furthermore contains the stip- 
ulation that 75 per cent of the crew in all depart- 
ments must be able to understand any order given 
by the officers. This paragraph prevents the em- 
ployment of Asiatic crews on American vessels, and 
thereby makes it practically impossible for American 
ships to compete in the Pacific with Japanese vessels 
on which the Asiatic crews naturally understand the 
language of their officers. 

16. Loss of Pacific trade. — The Seamen's Law has 
had the result of turning over our share of trans- 
Pacific shipping to the Japanese. In the Third Na- 
tional Foreign Trade Convention, Captain Dollar of 
San Francisco stated that while in November, 1914, 
the relation of American to Japanese tonnage in the 
Pacific was 45,315 net tons to 89,932 net tons, in 
November, 1915, American shipping had shrunk to 
3,186 tons, and Japanese had increased to 141,262 

Several months after the Seamen's Act was passed 
the Korea and Siberia, two large American ships of 
18,000 tons each, the pride of the Pacific INIail Steam- 
ship Company, were sold to the International Mer- 
cantile Marine Company, at the very time when the 
commerce of our country was crying for ships as mer- 
chant carriers and as naval auxiharies, at a time 
when ships were scarce and could not be duplicated. 
The two ships were soon sold by the International 
Mercantile Marine Company to Japan, thereby mak- 
ing the transfer result in a twofold handicap in the 


American struggle for the trans-Pacific trade. This 
sale furthermore seriously jeopardized American 
prestige in the far East. 

17. Purchase of the Pacific Mail. — Just before the 
Pacific Mail Company was about to sell its last 
steamer, W. R. Grace and Company, backed by the 
American International Corporation, bought up the 
small remains of its fleet in order to prevent a total 
loss by a firm which had established a large business 
and created a good name for itself. Since this change 
of ownership, several ships which have been purchased 
from the Royal Dutch West India Company, have 
been added to the fleet of the Pacific Mail Steamship 
Company. This addition, however, is only temporary, 
and is due to the very high freight rates which at the 
present time more than compensate for the increased 
expenses imposed by the Seamen's Act. According 
to the New York Times of August 27, 1916, W. R. 
Grace and Company have given notice that a return 
of normal conditions will compel the discontinuance 
of their service unless the Seamen's Law is replaced 
or wisely amended. 

18. Status on the Atlantic. — In the Atlantic mat- 
ters do not stand much better, but here the causes 
which bring about similar results are entirely difl*er- 
ent. In 1902 a praiseworthy attempt was made to 
establish the Stars and Stripes on a large scale in the 
Atlantic trade. In that year the International Mer- 
cantile Marine Company was formed. 

It was the conception of two Americans who had long 


dreamed of merchant marine under the Stars and Stripes. 
These men were Mr. Bernard Baker of Baltimore who con- 
trolled the Atlantic Transport Line, and Mr. Clement A. 
Griscom of Philadelphia, who had established the American 
Line. They succeeded in obtaining Mr. Morgan's ear — and 
the formation of the International Mercantile Marine Com- 
pany was the result. It operates directly only six vessels. 
It is mainly a holding company. Tho chartered in the 
United States, the ships in which it is interested sail almost 
exclusively und^r foreign flags, namely, the British, Belgian 
and Dutch flags. 

This corporation is the greatest item in American 
shipping, and its creation led to one of the most inter- 
esting attempts to create an American merchant ma- 

19. British restrictions. — The attempt to Ameri- 
canize the great shipping combine led to developments 
that brought to light a clause in a contract between the 
British government and the International Mercantile 
Marine Company. This clause was imposed on Mr. 
Morgan by the British government as the price of 
permission to bring British shipping companies into 
an American combination: 

No British ship in the association or any ship which may 
hereafter be built or otherwise acquired for any British com- 
pany included in the association shall be transferred to a 
foreign registry without a written consent of the president 
of the Board of Trade, which shall not be unreasonably with- 
held, nor be nor remain upon a foreign registry. Nothing 
shall be otherwise done whereby any such ship would lose its 
British registry or its right to fly the British flag. 

The Americans also promised that the British 


government should always be represented on the 
Board of the International Mercantile Marine Com- 
pany. This clause frustrated any attempt of the 
American International Corporation to Americanize 
the International Mercantile Marine Company. 

20. Present role of Canadian Shipping. — On De- 
cember 31, 1914, the tonnage of all vessels on the 
registry books of the Dominion stood at 932,422. 
Included in this total were 4,054 steam vessels with a 
tonnage of 744,783. Twenty years earlier Canada 
ranked fifth place among the great maritime nations 
of the world; in 1914, she came in tenth place. 

While even this is a fairly respectable showing con- 
sidering the population of Canada, yet her vessels 
played a very minor role in the total carrying-trade 
of the world, or indeed in that of Canada herself. 
Roughly, the same small percentage represents for 
both Canada and the United States the extent to 
which their own ships participate in the transporting 
of their own exports and imports. For the period 
1900-1914 Canadian vessels carried on an average 
only about 10 per cent of Canada's imports by sea, 
and about 12 per cent of Canada's overseas exports. 
According to recent estimates Canada's freight bill 
paid to foreign countries during this same period was 

21. The lake fleet. — The above figures include ves- 
sels engaged in the coasting and inland trade as well 
as in the overseas trade. It has already been ex- 
plained that the coasting trade of Canada is open to 


all British ships, unless they are foreign-built British 
ships, in which case a license must be secured and a 
duty of 25 per cent paid. It is also open to certain 
foreign ships under treaty rights, and may be thrown 
open at any time to the ships of any nation which 
grants similar privileges to Canadian vessels. 

For the fiscal year 1913-14 there were on the inland 
waters above Montreal 265 British and Canadian ves- 
sels with a gross tonnage of 310,176, nearly all of 
which was Canadian. The Canadian fleet here comes 
into competition with the mercantile fleet of the 
United States on the Great Lakes. Actual and open 
competition, however, is restricted by the coasting 
laws of both countries to only that part of the traflic 
which passes, or which can be made to pass, from a 
port in one country directly to a port in the other, 
either because the goods so shipped are designed for 
consumption in the latter country, or can pass in 
transit thru that country on favorable terms. In 
comparison with the United States fleet the Canadian 
mercantile fleet is, of course, small; but it has been 
steadily growing and in the typical year 1913 of the 
strictly competitive traffic it secured somewhat the 
larger share in proportion to the relative carrying 
capacities of the two fleets. This inland fleet, there- 
fore, presents no particular problem for Canada. 
The Dominion may note perhaps that after the war 
there will be as great a scarcity of tonnage on the 
lakes as on the ocean. Over one hundred vessels were 
transferred from the lakes to the ocean service, and 


construction of lake vessels in Canadian yards practi- 
cally ceased. 

22. Seagoing coasting trade. — In the seagoing 
coasting trade, one point needs to be noted. In the 
calendar year 1916, there were ti'ansf erred from the 
Canadian Register 42 vessels with an aggregate ton- 
nage of 25,834. The chief cause of this transference 
was what was claimed to be an unfair provision in 
the Canadian Shipping Act, requiring coasting ves- 
sels of over 100 tons burdens to carry certificated 
masters and mates. No such conditions were exacted 
by the legislation of Newfoundland, Barbadoes, 
United Kingdom, etc., and the tendency was becom- 
ing general to seek registrj^ under another country. 
The United States in addition now afforded a refuge, 
as the old law against registering foreign ships had 
been repealed, and in this same year fourteen Canadian 
ships were secured. 

This condition led to a considerable demand in 
Canada for the enlargement of the area for which 
coasting certificates were issued. The earlier law re- 
stricted a coasting voyage roughly to a voyage 
between any port in Canada and any port in America 
on either coast north of 5 degrees north latitude. 
As in normal pre-war years this coasting trade was 
proving barely profitable, and as it was desired to 
enter the more remunerative coasting trade of South 
America, an amendment was passed in 1915, extend- 
ing the southern limit of a coasting voyage to 40 


degrees south latitude. This amendment will, it is 
hoped, tend to check the loss of Canadian ships from 
the Canadian register. 

23. Dry docks and the dry dock subsidy policy. — 
One of the ways in which Canada has encouraged this 
industry has been by the building and subsidizing of 
dry docks. Under the Act passed in 1910, dry docks 
are divided into three classes according to size and 
cost — varying from 400 foot length, 3,500 ton lifting 
power and under one and a half million dollar to 900 
foot length, 25,000 ton lifting power and four million 
dollar cost — and subsidies are paid in each case of 
from 3 to 3/^ per cent of the cost of construction for 
from 20 to 35 years. Plans of course must be ap- 
proved and construction supervised by government 
engineers. As a result there has been a rapid exten- 
sion of such ship-building and ship -repairing facilities 
in Canada. 

On the Great Lakes where, for a number of j^^ears, 
many large modern vessels have been turned out, 
there are dry dock facilities at Toronto, Colhngwood 
and Port Arthur. At present the largest dry dock 
on the Great Lakes is the one at Port Arthur, which 
has a usable length of 679 feet. Extension of the 
facilities at Halifax, St. John and Quebec is now 
taking place on a large scale. At Sydney, the 
hub of the iron and steel industry in Nova Scotia, 
a strong company headed by Sir Henry Pellatt and 
backed by British capital was formed a few years 


ago to build a large dry dock and shipbuilding estab- 
lislinient, but no steps have since been taken other 
than to secure a large bonus from the city. 

On the Pacific Coast where shipbuilding has re- 
ceived an impetus in the last few years owing to the 
rapid development of British Columbia, several large 
docks have been built or projected. The government 
dry dock at Esquimalt has a usable length of 430 
feet. At Vancouver, a dock of 550 foot length and 
15,000 tons lifting capacity, which has been projected 
for some years, is now in process of construction, while 
at Prince Rupert the Grand Trunk Railway is build- 
ing a still larger floating dock with a length capacity 
of 600 feet and a lifting capacity of 20,000 tons. 

Finally, the most modern and largest floating steel 
dry dock in Canada today is that owned by, and 
operated in connection with a shipyard and repair 
plant of the Canadian Vickers, Limited, Montreal. 
With a length of 600 feet and a lifting capacity of 
25,000 tons, it has already proved of great service^ 
especially during the present war. 

24. Another form of government aid. — The Cana- 
dian government also makes use of another typical 
method of state-aid to shipping, that of postal sub- 
ventions. Each year over two and a half million 
dollars are paid to various steamship companies for 
the transportation of mails on certain definite routes, 
especially between Canada and the mother-country or 
other parts of the Empire. The objects are to pro- 
vide regular and more rapid service, to encourage as. 

XV— 23 


many direct sailings from Canadian ports as pos- 
sible and, as a consequence, to foster Canadian trade. 
In some cases it is provided that the rates from 
Canadian ports to England shall not exceed those 
from New York, and that discrimination shall not 
be made against Canadian merchants or shippers, or 
against immigi-ants to Canada or against any Cana- 
dian port. 

Tho two-thirds of the officers and crew must be 
British subjects, there is no provision requiring the 
ships to be Canadian built. Instead, then, of directly 
aiding the shipbuilding industry, these subventions 
have an indirect influence only, increasing the tonnage 
calling at Canadian ports and making shipping more 
profitable thru the building up of Canadian trade. 
25. Discrimination against a Canadian marine. — It 
is claimed that one result of recent legislation is 
to make Canadian owners pay more than foreigners 
for Canadian-built tonnage. Material entering into 
the construction of a Canadian vessel is subject to 
duties varying from 27^^ to 37/4 per cent for the 
heavier, and to higher rates for special and lighter 
parts. The present drawback in the case of vessels 
built for Canada is 65 cents per gross ton for non- 
classed craft, 75 cents for ships classed for 7 years, 
85 cents for ships classed for 9 years, and $1.15 for 
the fifteen year class. The effect of these drawbacks, 
it is claimed by builders, is insignificant, and certainly 
not enough to offset the advantage given to foreign 
owners by the new order which enables a vessel to be 


built in Canada for a foreigner at a lower cost than 
for a Canadian. Especially is this felt to be a hard- 
ship at the present time when an attempt is being 
made to estabhsh a nucleus for a larger ocean-going 
Canadian merchant marine. 

It is to be noted also that at present British-built 
vessels plying the Great Lakes in competition with 
the Canadian built boats retain British registration, 
and thus come into Canada practically duty free. 
On the other hand if the same vessels were bought 
by Canadians and entered in Canada a duty of 25 
per cent on the hull, rigging, machinery, etc., would 
have to be paid. 

26. Proposals of the Dominion government. — 
Apart from the dry dock subsidies, the postal sub- 
ventions and the drawback regulations previously 
mentioned, no definite steps have been taken by the 
government at Ottawa to build up a Canadian mer- 
cantile marine. 

In April, 1916, the Minister of Trade and Com- 
merce gave to Parliament a comprehensive review 
of the whole subject and asked for suggestions from 
all parties in the House. Outlining the causes which 
had given rise to the serious scarcity of tonnage he 
showed how it had been impossible for the government 
to solve the problem by chartering vessels or by con- 
trolling rates. Increasing the tonnage was the only 
solution of the emergency problem and that took 
time. It was even more important that shipbuilding 
in Canada should be put on a permanent basis. 


27. Suggested form of government aid. — The min- 
ister stated: (1) that a country of such large and 
increasing productive capacity as Canada occupies 
an undesirable position if it does not have a very con- 
siderable commercial tonnage for its own use; (2) 
that commercial tonnage taken year in and year out 
is a profitable investment for a country; and (3) 
that the matter could not be left entirely to corporate 
and private enterprise. 

He then outlined three possible forms of govern- 
ment aid, condemning the tonnage construction sub- 
sidy policy and the policy adopted recently by the 
United States, and tending to favor for Canada a 
scheme similar to that proposed by the Chamber of 
Commerce of New York for the United States. This 
scheme, it will be remembered, proposed to set up a 
commission exercising general oversight over the ves- 
sels to be built under the plan, and having power to 
enter into contracts with builders of ships under 
which the latter would be allowed the difference be- 
tween the cost of construction in Canada and in 
European ports. Also to enter into contracts with 
shipowners, when the ships were built, guaranteeing 
them during the life of the ship the difference in cost 
of operation under the Canadian and under a Euro- 
pean flag. 

28. Other proposals. — This statement by a mem- 
ber of the government looked promising. But the 
matter dropped and nothing was done. 

A few months later another Cabinet minister sug- 


gested, in an interview, that the probable solution of 
the problem of securing a direct service between 
British Columbia and the Canadian Atlantic ports 
which the people of the former province so earnestly 
desired was for the Dominion government to order 
the building of two suitable vessels in British Colum- 
bia and then place these public-owned steamers on 
this route. This has not been done. Unofficial state- 
ments have been made that after the European war 
the Dominion government would establish a state- 
owned line of trans-Atlantic steamers. Such a 
scheme will doubtless find strong support from some 
members of the government. Much depends upon 
the report of the commission now investigating the 
Canadian railway situation. 


How has the development of shipping in the coastwise trade 
differed from that in overseas commerce? 

How does the American merchant marine compare with that 
of other countries ? 

What economic conditions are favorable to shipping growth ? 

Describe the Ship Registry Act and the War Risk Bureau? 
What effect have they had? 

What was the Ship Purchase Bill and what was its fate ? 

What is the Seamen's Act and what has been its effect upon 
American shipping in the Pacific trade? 

What was the purpose of forming the International Mercantile 
Marine Company? How does it operate and what has been its 
success ? 

Outline the history of Canadian shipping. Discuss the present 
role played by the Canadian merchant marine in both coasting 
and overseas trade. 

What encouragement does the Dominion government give to 
Canadian shipping? 

What proposals for a national shipping policy have been made ? 



1. War problems displace peace conditions. — At 
the beginning of 1917 the outlook for the American 
merchant marine was blurred and confused. Whether 
the measures which had been adopted would promote 
shipbuilding in any great degree was at least dubious. 
Questions of costs of construction and operation were 
gravely weighed. Now these questions have been 
brushed aside by the imperative need for ships. The 
exigencies of warfare require results, and a nation at 
war does not stop to count the costs. 

The entrance of the United States in the World 
War in April, 1917, did not find the industries of the 
country wholly unprepared for the emergency. For 
more than two and a half years ever increasing quan- 
tities of munitions and supplies had poured out of our 
great seaports; agriculture and industry had largely 
adapted themselves to the situation. The new emer- 
gency meant additional strain upon their capacity; 
but the ground had been broken and the foundation 
was laid. 

But this is not the case in the shipbuilding industry. 
Before the war this important branch of American en- 
terprise had been sadly neglected so that it appeared 



like a pigmy beside its big brothers, the iron and steel 
industries, and the war itself had not given it the stim- 
ulus which other branches had experienced. The dec- 
laration of war meant more for American shipping 
and shipbuilding than for any other industry. 

2. Demand for ships. — For no other product of 
human energy had the demand grown as a result of 
the war to anywhere near the extent as it had for ships. 
The realization of this fact which, by now, has become 
the common property of the American people could 
not fail to stir into life the potential forces of this coun- 
try as a builder of ships. We saw in the previous 
chapter that the year 1916, tho full of splendid oppor- 
tunities had failed to awaken the dormant energies, 
lulling them rather, as it were, with such narcotics as 
threatening government ownership and a Seamen's 

The entry of America into the war changed all this 
at an instant ; the spell was broken immediately. The 
two main deficiencies had been lack of men and scar- 
city of money. The empty purse of the shipyard own- 
ers was filled as never before out of Uncle Sam's cor- 
nucopia. The youth of the land that in former times 
had despised or dreaded the life of the sea now, 
prompted by patriotic enthusiasm, rapidly filled the 
ranks of navy, naval reserve, and merchant marine 
and swelled their numbers to hitherto unheard of 

There is something of romance in this story of a 
hundred million people in a billion dollar land sud- 


denly remembering that "Old Glory" once had flown 
from mastheads in every port of the globe, — this met- 
amorphosis of dreary wastes of marshes into humming 
shipyards turning out wooden and steel ships in rapid 
strides, the transformation of landlubbers into sturdy 
seamen, and, above all, the change of front which took 
place in the consciousness of a whole people. 

3. Operations of the Sliijjping Board. — The organ- 
ization by means of which this wonder is being accom- 
plished, the United States Shipping Board (with its 
executive adjunct, the Emergency Fleet Corpora- 
tion) ,^ had been created in 1916, but it could barely be 
said to have come into existence until the necessities 
of war rendered drastic action unavoidable. The first 
important step was the seizure of ninety-one German 
ships of an aggregate of 594,696 gross tons. Then, on 
May 15th, a generous Congress appropriated over 
$400,000,000 to be spent by the Shipping Board for 
the building of merchant ships. It was announced 
that on July 13, 1917, contracts had been let for 348 
wooden ships of 1,218,000 tons, to cost $179,000,000, 
and for 77 steel ships of 642,800 tons, to cost $101,- 
660,356. In addition to this, two government plants 
were to be erected for the construction of steel ships. 

A further step was taken in August, 1917, when 
the Emergency Fleet Corporation requisitioned all 
vessels under construction in the shipyards of the 
United States of 2,500 tons deadweight capacity. By 

1 Organized April 16, 1917, incorporated with a capital of $50,000,000 
under the laws of the District of Columbia, now employs about 1,000 
employes in 16 oiBces in Washington and seaport cities. 


this act the United States acquired a total number of 
403 vessels with an aggregate dead weight tonnage of 
over 2,000,000 tons. More money was needed and an 
estimate submitted to Congress for a shipbuilding 
program calling for 1,270 ships of 7,968,000 tons. 

The estimates of the entire cost were given as fol- 

Contracts already let, 433 ships, 1,919,200 tons, $285,000,- 
000. Contracts ready to let, 452 ships, 2,968,000 tons, $455,- 
500,000. Under negotiation, 237 ships, 1,281,000 tons, 
$194,000,000. One hundred and fifty miscellaneous vessels, 
1,800,000 tons, $300,000,000. Construction of government 
owned fabricating yards, $35,000,000. Commandeering will 
cost $515,000,000 and the purchase of ships $150,000,000, 
and for commandeering, $250,000,000. The board now de- 
sires from Congress authorization to spend, for construction, 
$719,500,000; for commandeering, .$265,000,000, and for 
purchases, $150,000,000. 

The first annual report of the United States Ship-- 
ping Board contains the following statement of ap- 
propriations available to the Board and to the Emer- 
gency Corporation for the construction, purchase, 
requisitioning and operation of vessels : 

Amounts Amounts Amounts to be 

Purpose of Appropriation Authorized Appropriated Appropriated 

Ship Construction $1,284,000,000 $550,000,000 $734,000,000 

Shipyard Plants 35,000,000 35,000,000 

Requisitioning of Ships 515,000,000 350,000,000 165,000,000 

Purchase of Ships 150,000,000 150,000,000 

Operation of Ships 5,000,000 5,000,000 

Total $1,939,000,000 $1,090,000,000 $899,000,000 

The apparent delay in America's shipbuilding pro- 
gram caused the appointment of a Senate Committee 


to conduct a sweeping inquiry into the activities of the 
Shipping Board and the actual status of American 
shipping and shipbuilding. Much valuable informa- 
tion has been brought to light "as a result of this inves- 
tigation. Thus the following statement which enu- 
merates the tonnage contracted for up to December 
21st was elicited from Chairman Hurley: 

No. of No. of 

contracts vessels Tonnage 

April 1 12 42,000 

May 9 76 854,200 

June 20 137 646,900 

July 24 138 591,800 

August 25 110 424,300 

September 12 185 1,142,500 

October 6 114 934,200 

November 46 192 1,054,400 

December 4 35 326,800 

Total 147 999 5,917,100 

On January 4, 1918, a Washington dispatch re- 
ported that an appropriation of $82,000,000 was asked 
for the extension of shipyards and for providing 
housing facilities for workmen. This request if 
granted will bring the total amount of funds placed 
at the disposal of the Board to $2,018,000,000. 

4. New shipyards necessary, — So much about 
plans ; now as to accomplishments. It is one thing for 
Great Britain to build two or three million tons a year 
and another thing for this country to build a greater 
or even a like amount. Great Britain is the ship- 
builder of the world. Her yards, grown strong as 
the cradle of the world's mightiest battle fleet, were 
accustomed to turn out between 60 and 70% of all 
ships built anywhere. These yards had a normal ca- 
pacity of approximately 2,000,000 tons gross. The 


United States had never turned out more than 615,- 
000 tons gross in one year and that was in days when 
shipbuilding in America was a flourishing industry. 
The total output of American yards in recent years 
had been as follows : 

Fiscal year ending 

June 30th No. Tonnage 

1913 1435 346,155 gross tons 

1914 1151 216,250 

1915 1157 225,122 

1916 937 325,413 

To raise this figure to 8,000,000 tons gross is indeed 
a bold undertaking. The diihculty is immeasurably 
increased by the extraordinary demand which the 
Navy Department is making on the yards of the coun- 
try. Chairman Hurley estimates that the navy prog- 
ress is the equivalent in dollars, and therefore in ship- 
building eiFort, of the construction of 2,500,000 tons 
of merchant shipping. Such a program meant the 
virtual monopolization of practically 70% of the 
eighteen most prominent yards of the country. New 
yards had to be created ; old yards had to be enlarged 
and improved. The contracts of the Emergency Fleet 
Corporation have been let to 110 yards of which 36 
existed January 1, 1917, and 74 have been created 
since. Besides this the vessels being built in 22 yards 
have been requisitioned. 

5. Materials needed. — The question of materials is 
important. As far as steel is concerned little is heard 
of inabilitv to make deliveries. Of course, the steel 


industry is already straining every nerve and the un- 
filled orders of the United States Steel Corporation 
have greatly increased during the last six months. 
The steel ships planned will require 3,500,000 
tons of steel, wliich after all is but 10% of this coun- 
try's output and with proper priority rulings the dif- 
ficulties of setting this quantity free for ships ought 
not to be insurmountable. Somewhat less cheerful is 
the outlook for wood. Ships cannot be built out of 
unseasoned wood. One of the chief reasons for the 
delay in carrying out the wooden ship plan has been 
the inability to secure all the lumber which had been 
promised. Admiral Bowles stated in December, 
1917, that only 30% of the lumber required for the 
yards on the Atlantic and Gulf Coast had been deliv- 
ered and about 40% of the Pacific Coast require- 

6. Labor available not adequate. — But the great- 
est difficulty of all is the labor problem. Before the 
war the domestic yards of this country employed 
perhaps 30,000 skilled laborers. Now between 400,- 
000 and 500,000 workmen are necessary to carry 
out the plans of our Shipping Board. In order to re- 
cruit this army the Emergency Fleet Corporation has 
instituted an Industrial Service Department which 
in cooperation with the Department of Labor is as- 
sisting shipbuilders in the employment of suitable 
labor and is initiating an extensive system of voca- 
tional training with the purpose of adapting allied 
trades and unskilled labor for service in shipyards. 
The Department of Labor is expected to cover the en- 


tire continent with a network of labor exchanges 
which will recruit and transfer workers from one sec- 
tion to another and eliminate the chaotic condition 
which still exists today. The number of men em- 
ployed in merchant shipbuilding increased from 50,- 
000 in July, 1917, to about 145,000 in January, 1918. 
But at least a quarter of a million still remain to be 
recruited to meet the plans of the Shipping Board. 

It is to be hoped that these difficulties may be over- 
come, but it would be blindness if we failed to rec- 
ognize their existence. 

7. Operating the ships. — Xot less important than 
problems of construction are those of operation. A 
ship is a delicate mechanism and requires careful and 
skilled handling. It has been estimated that the ships 
already planned will call about 200,000 officers and 
seamen into service. To man only the ships which 
await completion in 1918 an army of 6,400 watch offi- 
cers, 6,400 engineers, 24,000 sailors and an equal num- 
ber of firemen, 12,000 coal passers, 9,600 oilers and 
water tenders, and 16,000 cooks and stewards will 
have to be recruited. The coastwise fleet will to a 
large extent be the nursery for the deck and engineer 
officers. It will have to furnish the nucleus of the offi- 
cers who are to navigate the new tonnage as it did that 
of the crews which today operate the more than one 
hundred German and Austrian ships which were 
seized and pressed into service as transports, etc. In 
addition to this, nautical schools all along the Atlan- 
tic and Pacific Coasts are training eager youths from 
every state of the Union. The Shipping Board in its 


first annual report of December 1, 1917, tells of 27 
navigation schools in existence. 

8. Government or private operation. — The next 
question is the great alternative of government or pri- 
vate operation. Future action is foreshadowed by the 
manner in which the government is dealing with the 
slightly over 2,878,000 tons of American ocean-going 
ships of over 2,500 tons deadweight capacity which on 
October 15th were requisitioned by the Shipping 
Board. These vessels are chartered by the govern- 
ment at rates which range from $5.75 per ton for 
freight vessels to $11.50 per ton for fast passenger 
boats. These rates are substantially below those that 
are obtainable in the open market. 

After the charter rate for the vessel has been estab- 
lished the freight rate will have to be fixed. Both 
these regulations belong to the office of the Chartering 
Commission which the Shipping Board appointed 
in September, 1917. The rates before the war, a 
high war rate and the rate which at this writing the 
Chartering Commission is expected to announce are 
given below: 

Before War High War Rate New Rate 

Cotton, per 100 lbs $0.35 $8.00 $3.00 

Wheat, per quarter 50 9.00 4.50 

General Cargo, per ton 10.00 160.00 75.00 

Chartered tonnage per ton per month. . .60 15.00 11.00 

It must be said, however, that the new rates are as 
yet entirely conjectural, no official announcement 
upon the subject having thus far been made. 

The latest development is indicated in an announce- 


ment made by Chairman Hurley under date of Janu- 
ary 13, 1918. This comprises a reorganization and 
expansion of the "Division of Operation" of the Ship- 
ping Board so as to place representatives in London, 
Paris and Rome and branches in nearly all important 
Atlantic coast ports. The purpose is to render more 
effective control of American shipping and to insure 
complete cooperation with the shipping of the allies. 
This is said to be a direct result of the latest inter- 
allied conference at Paris. 

Summing up this story of the return of the Amer- 
ican merchant marine we are giving below the growth 
of our tonnage. Previous to the outbreak of the war, 
figures compiled by the government gave the total 
gross register tonnage of all craft over 100 tons under 
the American flag at 8,600,000. Of these about 
4,000,000 were trading between ports on the Atlan- 
tic coast. Gulf of Mexico and Pacific coast; about 
3,000,000 on the Great Lakes. That leaves about 
1,600,000 gi'oss tons for foreign trade. Since then 
many foreign vessels have been transferred to Amer- 
ican registry, amounting altogether to about 500,- 
000 gross tons. A total of at least 400,000 gross 
tons was built since the war, about 600,000 of German 
and Austrian vessels were seized so that at the present 
time the ocean-going tonnage under the American flag 
is probably not less than 3,000,000 gross tons. In 
addition to this many of the coastwise vessels are 
potentialities for the foreign Gervice. 

9. American shipping as part of world's shipping. 


— The deeper meaning of "America's Great Adven- 
ture in Ships" can be grasped only when we conceive 
the shipbuilding program of this country in connec- 
tion with the shipping situation thruout the world. As 
far as shipping is concerned, it is practically out of 
date to speak of countries. If the war is to last an 
appreciable time longer the world shipping pool will 
be a reality if it is not already one today. The stress 
of time will in all likelihood necessitate ah extension 
of pooling arrangements to every seafaring nation. 

The world's supply of ships depends upon the two 
forces of construction and destruction. The latter is 
to be understood to cover losses from wear and tear, 
normal accidents, as well as war losses, i. e. thru raid- 
ers, mines and submarines. It should be kept in mind, 
however, that both wear and tear and ordinary marine 
losses are indirectly affected by the war thru the 
effects of overstrain, deferred maintenance, inexperi- 
enced crews, removal of coast lights and like causes. 

If, on the other hand, we consider the shipping of 
an individual country additional items have to be con- 
sidered, namely those which refer to the mere shifting 
of tonnage from one nation to another : commandeer- 
ing and purchasing in the case of friendly nations, and 
seizure and capture when the transfer is between hos- 
tile countries. 

Of course, the mere quantity of available tonnage 
does not represent a true measure of the carrying ca- 
pacity of that tonnage. That, again, is influenced by 
such factors as a more liberal interpretation of lading 
regulations, abandonment of long distance trading. 


avoidance of all unnecessary duplications of serv- 
ices, etc. 

For several reasons it is extremely difficult to ascer- 
tain the exact effect of all these forces upon the status 
of shipping in war time. Much information which in 
ordinary time is willingly divulged is kept secret lest 
the enemy profit by it. Furthermore a comparison of 
statistical data of various nations regarding shipping 
is rendered difficult by the promiscuous use of various 
units of measure without any indication which meas- 
ure is meant. We refer here to the use of the gross, 
net and deadweight tons, the meaning of which was 
explained on page 206. 

10. World's tonnage in 1914- — A study of the 
changes in the world's shipping must begin with the 
number and capacity of ships in 1915. In an earlier 
chapter the number and tonnage of ships for the prin- 
cipal maritime countries have been given. Many of 
the current references are to deadweight capacity 
which may be estimated at 1% of the gross tonnage. 
Dividing the nations of the earth into groups accord- 
ing to their relation to the world conflict, the tonnage 
of 1914 as reported by Lloyd's Shipping Register 

Deadweight tons, 
Group Gross tons estimated 

Allies 28,324,000 47,205,000 

United States . . 5,368,000 8,945,000 

Central Powers. 6,648,000 11,080,000 

Neutrals 8,748,000 14,580,000 

49,090,000 81,810,000 

XV — 24 


11. Changes wrought hy war. — Losses to the 
world's shipping thru the activity of submarines can- 
not be stated with absolute accuracy, but from avail- 
able data a close approximation can be made. We 
know the amount of British losses in tons to Decem- 
ber, 1916, but after that date must estimate the ton- 
nage from, the number of ships sunk. To the losses 
so estimated for Great Britain and other countries, 
must be added losses from raiders, from mines, not 
fully successful submarine attacks — damaging and 
beaching — from ordinary maritime disaster and 
finally from wear and tear. To offset these losses the 
gains thru new construction are to be considered. 

To acquaint the reader with the sources of the in- 
formation and the processes by which conclusions are 
drawn from them would lead him thru a maze of fig- 
ures. The results of a careful inspection and weigh- 
ing of the various sources of information are shown in 
the following statement : 


Gross Deadweight 
Tonnage Tonnage 

I. World's Shipping, at Outbreak of the War 49,090,000 81,815,000 

II. Deductions, August 1, 1914, to December 31, 1917 

A. Tonnage withdrawn from world commerce 

1. German and Austrian tonnage 

German 5,450,000 

Austrian 1,056,000 6,515,000 

2. Russian and Allied tonnage 

tied up in the Baltic and 

Blacli Seas 1,000,000 

3. Allied tonnage held m enemy 

ports and ports occupied by 

the enemy 500,000 


Gross Deadweight 
Tonnage Tonnage 

B. Tonnage destroyed by submarines 

or mines 

1. British 

1914-15 1,225,000 

1916 1,136,000 

1917 4,351,000 6,712,000 

2. Other Allies 

1914-15 186,000 

1916 272,000 

1917 1,870,000 2,328,000 

3. Neutrals 

1914-15 327,000 

1916 663,000 

1917 1,700,000 2,690,000 

C. Tonnage lost thru raid- 

ers, wear and tear, 
ordinary marine dis- 
asters, etc. 

1914-15 900,000 

1916 500,000 

1917 800,000 2,200,000 

Total Deductions 21,945,000 86,575,000 

III. Tonnage Remaining 27,145,000 45,240,000 

IV. Additions, August 1, 1914, to December 31, 1917 

A. Construction 

1. British 

1914-15 1,103,000 

1916 582,000 

1917 1,164,000 2,849,000 

2. United States 

1914-15 400,000 

1916 550,000 

1917 901,000 1,851,000 

3. Others 

1914-15 733,000 

1916 818,000 

1917 856,000 2,407,000 

B. Capture and Seizure of 

Enemy Vessels 

Great Britain 600,000 

United States 600,000 

Chile 320,000 

Brazil 250,000 

Portugal 250,000 

France 200,000 

Italy 150,000 

Cuba 20,000 2,390,000 

Total Additions 9,497,000 15,830,000 

V. Tonnage Available to Allies and Neutrals Decem- 
ber 31, 1917 36,642,000 61,070,000 

VI. Net Loss August 1, 1914, to December 31, 1917. . .12,448,000- 20,745,000' 
*25.3%. ■ ' 


12. Shipping losses. — The figures show a reduction 
in round numbers of over 12,000,000 tons in the 
world's available shipping, or roughly one-fourth of 
the total. This loss has not fallen exclusively upon 
the AMies and neutrals, but it represents a consider- 
able diminution in the world's carrying capacity. Of 
course there has been a loss of trade in many branches, 
but this has probably been more than offset by the im- 
perative demands which the armies and navies of the 
Allied powers make upon the remaining tonnage. 
Furthermore the increased demand for imported 
foodstuffs and fuel on the part of such countries as 
France and Italy intensifies the strain on the charter 
market. Add to this the tonnage space taken up by 
the American ammunition shipments and the needs of 
the American war machine itself, and the situation ap- 
pears in an entirely different light. How big the 
needs are, only those familiar with the militaiy secrets 
of the Allies are able to state. Here the war closes 
the door to the private investigator who must confine 
himself to the mere statement of the problems. 

13. Meeting the losses. — The loss of tonnage is be- 
ing fought not only by increased and accelerated 
building programs, but also by measures which have 
to do with the operation of the existing tonnage. 
There are two ways which deserve special attention 
because of their far-reaching effects — effects which 
will be as keenly felt after the war is over as they are 
being felt now. We refer in the first place to the 
shifting of the trade routes. In order to increase the 


efficacy of the available tonnage a large amount of 
the distant trading has been sacrificed. Such regions 
as Australasia, the Dutch East Indies and even im- 
portant sections of South America have been stripped 
of the tonnage which used to serve them in peaceful 
times. As Lord Robert Cecil said: "Many trades 
built up in distant waters and sustained by British in- 
dustries have been abandoned to neutrals, and even 
British coastal traffic is being subjected to a searching 
review to withdraw all vessels which can be utilized for 
ocean-going work." As far as could be done without 
sacrificing absolutely necessary trade connections, all 
shipping has been concentrated in the North Atlantic 
service, the trade with the West Indies and the trade 
between the Allies. The result is that huge masses of 
valuable supplies such as sugar in Java, wool and 
wheat in Australia cannot be moved. Such a shifting 
of the shipping of the world involves a great disloca- 
tion of trade. 

Closely connected with this is the drastic reduction 
of all imports not utterly indispensable for the sus- 
tenance of the population and the vigorous prosecu- 
tion of the war. In an interview last September Lord 
Robert Cecil stated that British imports were reduced 
from 58,000,000 tons before the war to 43,000,000 in 
1916 and to a figure still considerably lower in 1917. 
British exports experienced a reduction of 26% in 2% 
years of war. That is to say exports to the Allies in- 
creased slightly while shipments to the oversea domin- 
ions and to foreign countries fell off nearly one- third. 


What the year 1918 will bring to the navigating 
world cannot be foretold. The outcome will depend 
largely upon the achievements of American shipyards. 
If the accomplishment should be as great as are the 
plans all will be well. But haste is imperative. 


Explain the need for ships in the conduct of the war. 

Describe the operations of the United States Shipping Board. 

What problems of ship construction must be met in the ship- 
building program on which the United States has entered? 

What will be the operating needs of the new ships? 

What war losses has shipping of the world sustained since 



Commission, 89-91; Forwarding, 
91-92; Fereign, 102-03; Manu- 
facturers', 107; Del Credere, 
90; And early merchants, 96; 
In export trade, 137. 
American Exporters, 

European war, 113—14; Of copper, 

.SV? Foreign Trade, Cooperation in 
American International Terminal Cor- 
poration, 307-08 
Americas, The. See Banks 
Anti-Trust Laws, 

Objections to, 127 ; And foreign 
trade, 129-130 
Argentine, Grain Exports, 269—70 

Marking goods for, 154; Common- 
■wealth Commerce Act, 154—55 ; 
Invoices, 156; "Non-dumping" 
certificates, 176 

Balance of Trade, Favorable, 7—8 


Means of trade promotion, 71; 
Branches, 76-78; Federal Re- 
serve, 77 ; Foreign branches of 
Canadian banks, 80 
See Foreign Trade 

Berth Cargo, 244-45 

Bethlehem Steel Corporation, 
See Iron Ore 

Bill of Lading, 

Foreign, 159-60; Railroad, 160-61; 
Canada, 162; "London Clause 
Charge," 163; Export declara- 
tion, 167—68; Poraerene Act, 
169; When obtainable, 169-70; 
Consignee, 170; Negotiability, 
170-71; "Foul or clean," 171; 
"Letter of indemnity," 171; 
Railroad and ocean, 253 

Bill of Lading Act, 162 

Board of Trade, See Trade Informa- 

Boas, H. A., 272 

Bond, Goods in, 168-69 

Boyd, William, ^2-03 

Brazil, Consular Invoice for, 173-76 

Britain, Great, 

Ship measurement, 209-10; Load 
line, 210; Freight rates, 260; 
Coal exports, 268—69 ; Raw ma- 
terials, 304-05; Subsidies, 319 

British Board of Trade, 258 

British Royal Commission on Shipping 
Rings, 291 

British Sales of Goods Act, 136-37 

"British Shipping," 260 

Brussels Convention, See Sugar 


Of Navigation, 63 

See Trade Information 

Business, American, See Foreign Pol- 
icy of the United States 

"Business and the Government," See 
Trade Information 


Foreign trade and, 79-80; Rail- 
ways, 97, 310; Exporting meth- 
ods, 108-09 ; Commission houses, 
109 ; Canadian Customs Act, 
169n; Sail vs. steam, 219n; 
Coasting trade, 220; Privately 
owned lines, 237n; Ocean freight 
rates, 258n; Ship combinations, 
292-93; Drayton, Sir Harry, 293; 
Investigation Commission, 293; 
Proposed freeport, 307n; Ports, 
309; Montreal, 310-13; Pacific 
ports, 313; St. Johns and Hali- 
fax, 313 

Canadian Shipping, 

Present status, 331; Lake fleet, 
331-32; Tonnage, 332; Growth, 
332; Coasting trade, 333; Dry- 
docks, 334; Pacific, 335; Govern- 
ment aid, 335—36 ; Restrictions, 
336-37; Export Association, 338 

Canadian Shipping Act, See Govern- 

Canadian Trade, 

Former isolation, 20; Commercial 




Canadian Trade — continued 

policy, 21-22; Character, 22-23; 
Early stage, 23—24; Reversal in 
balance, 24—25 ; Creditor nation, 
25—26; Increased production 
needed, 26—27 ; Raw materials 
and food stuffs, 27—30; Manufac- 
turing, 20—31; Competition, 31— 
32; Promotion of, 32-34 
See Foreign Trade 

Canadian Trade Commissions, See 


Tramp, 228-29; Cost of carrying, 
229; Mixed, 229; Lots, 244; 
Berth, 245; Rate-making, 271-72 

Cargo Ton, Weight and Measurement, 

Carriers, Ocean, 

Development, 217; Restrictions on 
certain routes, 217—18; Reasons 
for growth in size, 218—19; Coal 
combustion, 219; Engine develop- 
ment, 219; Steam vs. sail, 219- 
20; Diesel engines, 221-22; Oil 
burners, 221; Wooden, replaced 
by iron and steel, 223; Classifi- 
cation by service, 224; Tramps 
distinguished from liners, 224- 
25; Commission on Shipping 
Rings, 225-26 
See Liners, Tramp Steamers 

Carriers, Private, 

Merchant, 232—33; Changes in type, 
233-34; Chartering, 234; Renais- 
sance, 234; Corporation owned, 
235; Examples, 235-36; United 
States Steel Corporation, 235-36 ; 
United Fruit, 236-37; Canada, 
237n; Merchants', 238-39; Oil 
trade, 238-39; Pacific Mail, 239; 
Pacific Ocean, 239—40; Railroad- 
steamship lines, 239—40 

Carriers, Public, Development of, 233- 

Cash Discounts, 137-38 


Custom House, 167-68; Of Origin, 
176; "Non-dumping," 176 

Chamber of Commerce, United States, 
204-05, 347-49 


Reasons for, 234; Continental, 
markets, 246-47 ; Great Britain, 
247; Typical operation, 247-49; 
Smith, R. J., 248-49; Ports of 
destination, 249; U. K. H. H. 
range, 250; Negotiations, 250—51; 
Exchanges, 250; Parties, 251-52; 

Chartering — continued 

Ship-brokers, 251 ; Trip and time, 
251; Rates, 257; Fluctuations, 
262; Marginal rate, 263; New 
York and other Atlantic ports, 
251-52; Clapp, E. J., 303 

China, Coal fields, 40 

See International Trade, World 

Civil War, American Merchant Marine, 

Clapp, E. J., 294, 301, 326 

Clayton Law, 129 

Clearance Papers, 212-14 


Consumption, and high speed, 237 ; 
British exports, 268-69; United 
States exports, 269-70 

Coal Trade, 

China, 40; International, 41; Eng- 
lish, 42 ; German, 43 ; Future of, 

Coastwise Shipping, 

Canada, 220, 333; United States, 
221, 314-15 


Soil exhaustion, 58 ; Importation, 
59; Valorization, 59 

Combinations, Ship, 

Tramps, 276-80; Sailing Ship Own- 
ers, 279; Baltic and White Sea 
Conference, 280; Liners, 280; 
Steamship agreements, 282 ; Im- 
portance, in U. S., 283 ; South 
American trade, 283—84; Con- 
ferences and pools, 284—85; Ship- 
ping investigation, 289; Monopo- 
listic nature, 289; Shippers' ob- 
jections to, 290-91; Deferred re- 
bates, 290; Canada, 292-93 


Philadelphia Commercial Museum, 

Commission House, 

Position, 97-98; Definition, 98; As 
Merchant, 98-99; Advantages, 
99-101; And Exporting manu- 
facturers, 101-02; And Foreign 
agents, 102-03; Field, 103-04; 
Services, 105; Limitations, 105; 
Canada, 109 

Commission on Shipping Eings, Royal, 

Commonwealth Commerce Act, 154 


Freight rates, 265, 273-74; Frank- 
lin, P. A., 277; Regulated vs. 
wild, 277; Hardy, Rufus, 277; 
Government investigation, 277-78 


Conferences, Steamship, 

Advantages, 286-89; Huebner, S. S., 
286-87 ; Rate wars. 287-88 ; Com- 
petition, 287-89; Economies, 288; 
British Royal Commission, 291; 
New lines, 291-92 
See Combinations, Ship 
Consular Invoices, 172-76 

Spinning industry, 54; World's 
consumption, 54 ; Growth of ex- 
port trade in, 55 
Creditor Nation, A, Becoming, 8 

See Canadian Trade 
Cubical Capacity, Of Vessels, 207-08 
Custom House, 

Making shipments thru, 164 et 
seq. ; Export declaration, 167—68 ; 
Manifest, 215 
Customers, Foreign, 

Getting order, 135; Samples to, 
135-37; Cash discounts, 137-38 

Dead Weight Tonnage, 205-06, 210- 

Declaration of London, 200 

Delivery, and prices, 138 

Diesel Engine, 221-22 


Racial, 37; Climatic, 37-38; Elimi- 
nated, 38; Stage of economic de- 
velopment, 38; Natural resources, 

Displacement tonnage, 205 

Discounts, Cash, See Cash Discounts 

Dollar, Captain Robert, 210 

"Dumping, Non-," Certificates of, 176 

ISconomic and Development Commis- 
sion, See Foreign Trade 

Emergency Act, 325 


Development of ship, 219; Diesel, 
221-22; Oil-burning, 221-22 

England, "Splendid Isolation" of, 4 

Entrepot, See Transshipment 

European War, 

Commercial interdependence, 4; 
Foreign trade, 5 ; Tax burden in 
Canada, 12 ; Small manufacturers, 
116—17; Need for cooperation 
after, 122 ; Commerce and indus- 
try, 122; Competition after, 133; 
Freight rates, 260, 274-75; Amer- 
ican Merchant Marine, 320—21 

Export Association of Canada, See 
Export Trade 

Export Trade, 

Protects domestic, 13 ; Federal Re- 
serve Act, 15; Webb Bill, 16; 
Pan-American Conference, 17 ; 
Vanderlip, F. A., 18-19; Canada 
and U. S., 20; United Kingdom, 
23; Increase, 24; Food stuffs and 
raw materials, 27; Forces pro 
and con, 30; Branch factories, 
32; Associations formed for, 33; 
Ottawa, 33 ; Cotton, 55 

Export Trade, Technic of. 

Indents, 135, 149-50; Receipt of 
order, 135, 150-51; Samples, 
135-37; Price policy, 137; 
Agents, 137; Cash discounts, 137— 
38; Price quotations, 137 et seq.; 
Typical sales contract, 141 et 
seq. ; Packing goods, 152—53 ; 
Marking goods, 154-55; Weights 
and measures, 154; Invoicing, 
155—57; Statement of charges, 
157; Certificates, 158, 176; Bill 
of lading, 159-60; Inland trans- 
portation, 159; Canada, 162-63; 
"London Clause Charge," 162; 
Shipments, 163—65; Necessary 
documents, 164—66; Custom 
Houses, 165-66 ; Export declara- 
tion, 167-68; Steamship bill of 
lading, 169 et seq. ; Consular in- 
voices, 172-73; Federal Trade 
Commission, 172 ; South America, 
172; Australia, 176; War re- 
strictions, 194—95 

Exporting Methods, 

Foreign trade, 84; Direct and in- 
direct, 85 ; Marketing, 87 ; Sales- 
men, 88—89; Commission agents, 
89-91; Freight brokers, 92; Par- 
cel post, 92-94; Middleman, 95- 
96; Commission house, 97 et seq.; 
Merchant system, 105-07; Can- 
ada, 108-09 


European war, 5, 7—8; Manufac- 
tured goods, 5—7 ; Raw materials, 
5, 9-10; NVheat, 5, 10; Four 
steps in evolution, 6 ; Creditor 
nation, 8 ; Reason for stimulation, 
8-9 ; Approximate tonnage, 242— 

Exports of United States, in war times, 
See War 

Express Companies, See Foreign Trade 

Far East, See Commission Houses 

Farrell, J. J., 66-67 

Federal Reserve Act, 15, 88-92, 304 



Federal Trade Commission, 111-13, 
116-17, 172 

Franklin, P. A., 278 

Free Trade, See International Trade 

Foreign Policy of the United States, 
Washington, George, 3 ; Monroe 
Doctrine, 3; Isolation, 4—5; Eco- 
nomic basis, 4 ; European War, 
4; Growth, 4; International in- 
terdependence, 4 

Foreign Trade, 

Individual venture, 4; Limits, 4 
Need for policy, 11; Industries 
12; Farrell, J. J., 13; Internal 
power, 13; Underwood, Oscar W. 
13—14; Ideal opportunity, 14-16 
Aid to expansion, 16—17 ; Need of 
science, 17—19; Panama Canal, 
15; Canada, 22—23; Raw material 
22 ; Manufactures, 22 ; Extension 
33-34; Training for, 66-67; Kies 
W. S., 67; National City Bank 
67; Canada, 68; Express com 
panies, 70-71; Banks, 71-73 
Bureau, 73-75; Railroads, 82 

Foreign Trade, Cooperation in, 

Need of, 110-11; European meth 
ods, 111-13; European War, 113 
122; American copper, 114; Ger 
man, 114—17; Advantages, 116- 
17; Forms, 119; Cartels and syn 
dicates, 119-21; Policies, 121-22 
Organization, 127 ; Legislation 
needed, 128; Exemption, 128-29 
Clayton Law, 129-30; Federal 
Trade Commission, 130—31; Can- 
ada, 132-33 

Foreign Trade, Elements of. 

World trade, 36; International, 37; 
Development, 37—39; Natural re- 
sources, 39—40; Coal, 41 et seq.; 
German, 43 ; British, 43 ; Grain, 
45-47; Sugar, 56-57; Coffee, 58- 
59; Rubber, 60-61 

Foreign Trade of United States, 

Necessity, 5 ; European War, 5, 7—8 ; 
Increased exports, 5 ; Manufac- 
tured goods, 5—6, 9—10 ; Favorable 
balance, 7-8; Statistics, 240; New 
York, 297-99 

Forests, See Trade Policy 

France, Subsidies to Sailing Vessels, 

Freedom of the Seas, 

Recognition, 199—200; International 
law, 199-200; Grey, Sir Edward, 
200-01; Hague Conference, 200- 
01 ; Economic law and, 201 ; Boyd, 
William, 202-03 ; Guarantees, 

Free Ports, 

Hamburg, 305; Hongkong, 305; 
Proposed in U. S. and Canada, 

Freight, Low grade, carried by tramp, 

Freighter, See Liners, Tramp Steamers 

Freight Broker, See Exporting Meth- 

Freight Charges, and Kinds of Tons, 

Freight Bates, Ocean, 

Growth in size of tonnage, 242—43; 
Charter and liner, 257, 262-64; 
vs. Land rates, 257 ; Reasons for 
low, 258; Canada, 258n; British 
Board of Trade, 259; Fluctua- 
tions, 259-62 ; British, inward 
and outward, 260; European 
War, 260, 274-75; "British 
Shipping," 261; Marginal, 263; 
Cost, of operation, 264; Competi- 
tion, 265-67; Knot time, 265, 
273; Sherman, L. K., 265, 271- 
72; Johnson, E. R., 265-66; 
Schwerin, R. P., 266; Pacific 
ocean, 267 ; Standards of Japan, 
267; Load factors, 268; U. S. 
and British coal exports, 268— 
70; Argentine grain, 269-70; 
Triangular voyages, 270-71; 
Mixed cargoes, 271; IJoas, H. A., 
272; Effect of tramps, 273-74; 
Quotations, 273-74; Huebner, 
S. S., 274; Conferences, 286-88; 
Rate wars, 287-88; Shipping 
Board, 336 

Freight Service, Ocean, 242 

Freight Traffic, 

United States, 244 ; Cargo lots, 244- 
45; Evolution, 244-45; Bertk 
cargo, 245; Liner, 246, 252-53; 
Charter market, 246-47; Con- 
tinental ports, 247—48 ; Great 
Britain, 247 ; Forwarders and sea- 
board brokers, 253; Steamship 
agents, 254; Transshipment, 254— 
See Charter Business, Liners 

German Cartels, 119-22 

Bismarck's view of colonies, 4; 
Raw materials exported, 10 

Packing, 152-53; Marking, 154-55; 
Commonwealth Commerce Act, 
154; Weights and measures, 154; 
Payment, 157—58; Inland trans- 



Goods — continued 

portation, 159 ; Bill of lading, 160 
et seq. ; Making shipment, 164— 
65 ; Custom House, 165-66 ; In 
Bond, 168-69 


And Trade, 62; Taxes, 62; Ship- 
ping, 63 ; Canadian Shipping Act, 
65 ; Consular reports, 67 ; British, 
aid, 68—70; Department of Trade 
and Commerce, 70; German serv- 
ice, 70; Prussian and German 
potash, 114; Control in war times, 
193-94; Investigations, 277; U. 
S. and Great Britain, 277-78 
See V/ar, Effects on Foreign Trade, 
and Shipping Problems in War 


Cargoes,' and New York, 301 ; Balti- 
more and Philadelphia, 301-02; 
"Railway Traffic," 302 

Grey, Sir Edward, 200-01 

Hague Conference, 200-01 
Hardy, Rufus, 277 
Hongkong, a Preeport, 307 
Huebner, S. S., 274, 286-87 

Immigration Traffic, 286 

Imports, Approximate Tonnage, 242— 

Imports of United States, influenced 
by war, 186-90 

Indent, The, 

Reason for, 135; Contents, 149-50; 
Open or closed, 149; Course, 150; 
Copies, 150; Order, 150-51; 
Form, 151 

Indirect Exporting, 91-95 

Industries and Foreign Trade, 12 

International High Commission, 154 

International Mercantile Marine, 278, 

International Trade, 

Causes, 37 ; Transportation, 37 ; 
Free Trade, 39; Coal, 41 et seq.: 
Iron ore, 44; Grains, 45—51; 
Banana, 52 ; Potato, 52 ; Cotton, 
53-55; Tobacco, 56-57; Sugar, 
57; Rubber, 60-61 


Foreign, 79-80; British, 80; Cana- 
da's foreign, 81; Canadian rail- 
ways, 82 


Low, 155; Export differs from do- 
mestic, 156-57; Consular, 172-73 

Iron Ore, 

And Industrial civilization, 44; 
Bethlehem Steel, 44 

Japan, Freight Rates, 267 
Johnson, Emory R., 265-66, 296 

Kies, W. S., 67, 125, 306 
Knot Time, 265 

Labels for Goods, 154-55 

Land Transportation, and Ocean, 203- 

Law, International, 199 et seq. 


Freight rate policy, 211; Distin- 
guished from tramps, 224-25; 
Advantages of, 229 ; Corporation 
owned, 235-38; Rates, 257, 263; 
Effect of tramps, 273 ; Combina- 
tions, 280—81; Rate cutting and 
rate wars, 281 

Liner Trafac, 

Intricacy, 252 ; Large shippers, 
252; Rate sheets, 252; Contracts, 

Lloyd's, 212, 251 

Load Factors, 267-68 

Load Line, 210-11 


Canada and Great Britain, 23; 
United States, 23 

London, Transshipment at, 302 

"London Clause Charge," 162-63 

Manifest, 215 

Manufacturers and Manufactures, 
Exports, 5—6, 9, 30; Competition, 
31; Opportunity, 31; Handi- 
capped, 116—18; Cooperation, 
118-19; Combination, 129 

Marketing Policy, See Policy 

Martin, M. M., 207 

Measurement of Ships, 207 et seq. 

"Merchandise Marks," 154 


Agents, 96-97; System, 105-07; 
Export, 105; German, 106; Brit- 
ish, 107 

Merchant Carriers, 232-33 

Merchant Marine, American 

Coastwise, 316—317; Present status, 
316; Importance, 317; Begin' 
nings, 317; Later development 
318-19; War of 1812, 318; Brit 
ish subsidies, 319; Civil War, 



Merdiant Marine — continued 

319; Recent tendencies, 320-21 
Compared to foreign, 318—19; De 
cline, 320; New interest, 322-23 
Steel industry, 322 ; Adverse con 
ditions, 323; Congress, 322-23 
European War, 323—24; Panama 
Canal Act, 324; Emergency Act, 
325; Ship Purchase Bill, 326- 
27; War Risk Bureau, 325; 
Clapp, E. J., 326 ; Seamen's Law, 
327 ; Dollar, Captain Robert, 328- 
29; Loss of Pacific, 328; Pacific 
Mail Co., 329 ; International Mer- 
cantile Marine Company, 329- 
30; British restrictions, 330 

Metric System, 209 


Position, 95-96; Elimination, 103 

Monroe Doctrine, 1 

Montreal, Importance of, 309—11 

Moorsom System, 207-08 

National City Bank, 67, 72 

Natural Resources, 

Differences in, 39-40; China and 
coal, 40; Development, 40—41; 
Effect on world trade, 40—41 

New York City, 

Value as a port, 297—98; Predomi- 
nance, 298-99; Hinterland, 299- 
300; Railroad facilities, 300-01; 
Steamship lines, 301; Transship- 
ment trade, 303-04; Federal Re- 
serve Act, 304; Decentralization 
of industries, 307 

Ocean Carriers, See Carriers, Ocean 

Ocean Transportation, 

Freedom of the seas, 199 et seq.; 
Differs from land, 203-04; Capi- 
tal outlay for, 204 

Oil-burning Vessels, 221-22 

Order, The, 151 


Legal status, 127; Sherman Act, 
127; Need of legislation, 128; 
Compulsory, 129 

Ottawa, See Export Trade 

Pacific Mail Steamship Line, 

Oil-burners, 222; Merchants' line, 
239; Panama Canal, 241; Pur- 
chase of, 328 
Pacific Marine Review, 210 
Pacific Ocean, 

Railroad-steamship lines, 239—40; 
Freight rates, 267 

Packing Goods, 

Climatic conditions, 152; Economy, 
152—53; Regard for prejudice, 
153; Kind and color of package, 

Panama Canal, Aid to Foreign Trade, 

Panama Canal Act, 322 

Pan-American Conference, See Export 

Panics, Domestic, 13 

See Export Trade, Foreign Trade 

Petroleum, Private lines for, 238 

Plimsoll Line, 211 


Free trade, 39 ; Rheinish-Westpha- 
lian Coal Syndicate, 43 ; Market- 
ing, 87; German export, 121; 
Control of cartels, 122 


Conferences and, 284; Administra- 
tion, 285-86; Definition, 286; 
Kinds of trades, 285-86; Fair- 
ness, 286; Immigrant traffic, 286 

Pomerene Act, 169 


Clapp, E. J., 294-301; Nature and 
functions of a, 294; Four classes, 
296; Johnson, E. R., 296; Value, 
296; Sea and River, 297; Ham- 
burg, London and New York, 297— 
98; New York, 297 et seq.; At- 
lantic, 301; Baltimore and Phila- 
delphia, 302; Freeports, 304-06; 
Canada, 310 

Post, Parcel, 92-94 


According to delivery. 138 et seq.; 
Cash discounts, 137—38; Policy 
of, 137-38; Quotations, 138-39; 
Typical sales contract, 141 et 
seq. ; Effect of war prices on trade 
statistics, 190-92 

Promotion of Trade, 

Americans abroad, 65 ; Training 
needed, 66; And available, 67; 
Canada, 68 ; Philadelphia Com- 
mercial Museum, 69 ; Trade 
papers, 70; Express companies, 
70-71; Banks, 71, 76; Federal 
Reserve Act, 76-78; Dollar ex- 
change, 78—79 ; Foreign invest- 
ments, 79 et seq. 


Canadian, 96-97, 310-11; Bill of 
lading, 160-67; Transportation 
different from sea, 204; And 
steamship bill of lading, 253; To 
New York, 300 



Bailroad-Steamship Lines, 

Pacific Ocean, 239—40; Canadian, 
240; Foreign, 240; Development, 
••Railway Traffic," 302 
Baleigb, Sir Walter, 14 
Bate Cutting and Bate Wars, 281, 

Bates, See Freight Kates 
Baw Materials, 

Exports, 5, 9-10; To Germany, 10; 
British, 304-05 

See Exports 
Baw Products Company of Kew York, 

See Rubber 
Bebates, Deferred, 290 
Eeciprocity, 124 
Begistered Tonnage, 206 

Consular, 64 
Bubber, 60-61 

Sailing Ship Owners, International 

Union of, 279-80 
Sailing Vessels, 

Decrease in number, 219 ; Canada, 

219n; vs. Steam, 219; In United 

States, 220; Advantages, 221; 

Future, 222-23; Usefulness, 222; 

French subsidies, 279-81 
Sale of Goods Act, British, 136-37 
Sales, Typical Contract of, 141 et seq. 
Salesmen, 88-90, 102 

Sending, 135-36; "Collectors," 

136; Charging for, 136; Must 

represent goods, 136; British 

Sale of Goods Act, 136-37 
Schwerin, R. P., 264, 271-72 
Seaboard Brokers, 253-54 
Seamen's Law, 327-28 
Seas, Freedom of the. See Freedom of 

the Seas 
Selling by Mail, See Post, Parcel 
Sherman, L. K., 265 
Sherman Anti-Trust Act, 111 
Ship-Brokers, 251 
Ship Purchase Bill, 325-27 

Routine of, 163-64; Docnmenta 

necessary for, 164-65 

Objections to combinations, 290; 

Deferred rebates, 284 
Shipping in United States and Canada, 

Shipping Bill, 342-44 
Shipping Board, 344-47 


Measurement, 207 et seq.; Inspec- 
tion and registration, 211-12; 
Documents, 212; Clearance, 213- 
14; Manifest, 215; Classes of 
merchant, 229 ; Construction, 229 
See Carriers, Ocean 
"Ship's Option," 209 
Smith, B. J., 248-49 
Societies, Cooperative, of Great Brit- 
ain, 116 
South American Trade, 

Regulations, 172 ; Ship c«mbina- 

tions, 283-84 
See Foreign Trade 
Speed, Coal Consumption for, 227 
Statistical Abstract of United States, 

See Trade Information 
Steamship Agents, 254 
Steamship Agreements, See Combina- 
tions, Ship 
Steam Vessels, vs. Sailing, 219 
Suez Canal, 217-18 

Sailing vessels, 279-80; British, 

Sources, 56-57; Brussels Conven- 
tion, 57-58 
See International Trade 
Supercargo, The, 233 
Sweden, Marking Goods for, 155 

Tariff Bates, See Foreign Trade, Co- 
operation in 


New York, 307; American Interna- 
tional Terminal Corporation, 308; 
Kies, W. S., 308 


Definition, 205; Displacement, and 
deadweight, 205; Registered, 206; 
Uniformity of measurement, 206- 
07; Martin, M. M., 207; Moor- 
som System, 207—08 ; Cubical ca- 
pacity, 208; Net register, 208; 
Kinds of tons, 208-10; British vs. 
American measurements, 209-10; 
Cargo tons, 209; Long and short 
tons, 209-10; "Ships' option," 
209 ; Metric system, 209 ; Com- 
puting net from gross, 210; Dol- 
lar, Captain Robert, 210; Dead 
weight capacity, 210—11; Pacific 
Marine Review, 210; Load line, 
211; Plimsoll Line, 211 


Freight charges, 208; Kinds of, 208 

Traffic, Ocean, Growth of, 242-43 

Trade Export, See Export Trade 



Trade Information, 

Relation, government to foreign 
trade, 62 ; Revenues, 62 ; Ship- 
ping, 63 ; Official publications, 64- 

Trade Policy, 

Restricts trade ■with U. S., 21; 
Commercial treaties, 21; United 
Kingdom, 23 ; Loans, 23 ; Inter- 
national relations, 25 ; Resources, 
27; Production, 27-28; Forests, 
28; Mining, 29 

Trade Promotion, See Promotion of 

Trade Publications, 75 

Tramp Steamers, 

Differ from liners, 224—25 ; Defi- 
nition, 225; Operation, 225; Con- 
struction, 226; Economy, 226-27; 
Coal Consumption, 227 ; Speed, 
227; Occupation, 227-28; Car- 
goes, 227 ; ' 'Keeping to the 
beat," 228; Legal status, 228-29; 
Transfer, 228-29; Charter ports, 
246-47; Charter business, 247- 
48; Effect on liner rates, 273; 
No lasting combinations of, 278— 
79 ; Examples of combinations, 

TransportatiOB, Inland, 

Method of handling, 159; Railroad 
bill of lading, 160-61 


Reasons for, 254; Entrepot, 298-99; 
London, 302 ; New York, 303-04 

Treaties, With British West Indies, 
France and Italy, 21 

Triangular Voyages, 270-71 

Underwood, Oscar W., 13-14 

United Fruit Company, Steamship 
Lines of the, 234-37 

United States, 

Economic structure of, 10; Need of 
trade policy, 11 et seq.; Free- 
dom of the seas, 202; Chamber 
of Commerce of the, 204-05 ; 
Moorsom system, 207-08 ; Foreign 
trade statistics, 244; Coal exports, 

United States, Foreign Policy of the, 
See Foreign Policy of the United 

United States, Foreign Trade, 

New York, 298 et seq.; "Outports," 
300; Transshipment, 303 

United States, Shipping, 

Coastwise, 63, 197; Plimsoll Lines, 
211; Inspection and registration, 
211—12; Clearance papers, 212— 
14; Sailing vessels, 220; Steam- 

United States, Shipping — continued 
ship agreements, 282; Ship com- 
binations, 283 
See Merchant Marine, American. 

United States Steel Corporation, Pri- 
vate Lines ©f, 235-37 

Vanderlip, F. A., 18-19 

Vessels, Measurements of, 206-08 

War, Effect on America's Foreign 
Early stages of war, 178-192; 
America's foreign trade, 179; 
Exports since 1914 to Europe, 
180-83 ; Other continents, 183- 
84; Nature of exports, 184-86; 
Imports, 186-90; Effects of high 
prices, 190—92 ; America enters 
the war, 192-95 ; Government 
control of trade, 193-94; Effects 
on export business, 194—95 

War, Shipping Problems in War 
America at war, 340; Demand for 
ships, 341-42; Shipping Board 
operations, 342—44 ; New ship- 
yards necessary, 344—45; Mate- 
rials needed, 345—46 ; Labor inad- 
equate, 346-47 ; Operating the 
new ships, 347—48 ; Government 
or private operation, 348—49 ; The 
world shipping problem, 349—51; 
World's tonnage in 1914, 351; 
War changes, 352-54; Meeting 
the losses, 354—56 

Washington, George, 1 

Webb Bill, 16 

Weights and Measures, 

Bureau of Standards, 154 ; Import- 
ance, 154; International High 
Commission, 154; Metric system, 


Exports of, 5, 10; Canadian exports, 
47 ; Intensive production, 49 ; 
Seasonal character, 50-51 ; Ar- 
gentine and United States, 51; 
Measurement, 209 
See International Trade 

Wooden Vessels, Replaced by Iron and 
Steel, 223 

World Trade, 

Nature of, 36; Growth, 37; Natural 
resources, 39 et seq.; Coal, 41; 
Iron ore, 44 ; Grain, 45 ; Sugar, 
56-57; Coffee, 58-59; Rubber, 

Young Men's Christian AssoclatioB, 



Los Angeles 

This book is DUE on the last date stamped below. 

HE Zismexmoxmr-— 

3030 Foreign trade and 
Z6S6£ sh1 ppi ng 

16% f